Buying a Foreclosed Property
Today’s Wiki Wednesday Feature: Things to Know When Buying a Foreclosed Property
Thinking about buying a foreclosure? With the way the market is heading right now, there are surely great deals on foreclosed properties to be had. But foreclosure can be a risky business: It’s important to be cautious and patient. Before you take the leap, you may want to read through this week’s featured article from the Real Estate Guide: Things to Know When Buying a Foreclosed Property. Written by the folks at Quicken Loans, this article delves into the three stages of foreclosure.
The first stage, pre-foreclosure, is when the owner has been notified that their home may be foreclosed, but they still own the property. As the article says, buying at this stage can be difficult because the sellers may be on a deadline and the deal must progress quickly. The second stage, buying at auction, is risky because there’s a possibility of unknown repairs and/or liens on the title. Plus, you may need to pay in cash in order to beat out the banks. The third stage is post-foreclosure, when the home is an “REO,” or real estate owned property by a bank or lender. At this point, the bank will likely hire a real estate agent to list the property. If the home has been on the market for awhile, you may be able to strike a better deal with the bank, since they want to sell these properties off as fast as they can.
The article also brings up some important tips to keep in mind when you’re shopping for foreclosures:
1. To have more negotiating power, get a full approval from a mortgage lender before you enter into negotiations.
2. How do you know you’re getting a good deal? Research, research, research. Be sure you’ve done a good bit of research on home values and recent sales in the area you’re looking in. (Zillow’s a good place to start!)
3. And once you’ve found a property, keep in mind that you have the leverage to ask the bank to pay for things such as closing costs and home repairs.