Tips on Buying Foreclosures

Foreclosures provide buyers the chance to have property at a considerable discount. However, buyers must note that foreclosures are sold”as-is” and are inclined to be in poor condition and may also be found in undesirable areas. What’s more, potential customers should exercise patience.

Contact Lenders Directly

Buyers should contact the lender of a foreclosed property right. Bank-owned properties have lower risk in comparison to other properties, since there are no taxes, liens or renters to evict. What’s more, lenders will be more inclined to provide prospective buyers incentives such as lower mortgage rates of interest, lower down payment and no closing costs. Lenders also include title insurance with the property. Formerly owned homes may have gone through a set of owners, and as issues with possession records may come up. Title insurance protects the buyer from loss linked to human mistake, thereby eliminating a lot of the risk normally associated with buying properties in the previous phases of foreclosure.

Get Lender Pre-Approval

A pre-approval letter to get a mortgage signals that the buyer will qualify for a home mortgage and also supply information regarding how much house the buyer can afford. A pre-approval letter also functions as a bargaining tool for the buyer. A letter can be obtained by providing the lender with documents demonstrating your credit history, employment information and financial status. Be aware that a fee may be required.

Consider Renovation and Repair Costs

Foreclosure properties may provide substantial discounts to market price, but they’re usually in poor condition. The savings you may acquire by buying a foreclosed home may be offset by large repair bills. Consider hiring a contractor before touring potential properties. An experienced contractor will have the ability to supply you with a more accurate estimate of the renovation costs. However, as with any potential investment, take time to scout and interview a number of contractors. Material costs tend to be fixed and readily determined by going to a local home-improvement shop, but labour costs will vary and typically account for a substantial section of the bill.

Wait to Make an Offer

Allow some time for the vendor’s representative to collect bids to the foreclosed property. By doing so, the broker will have a better idea of what prospective buyers are willing to pay for the house in question. Telephone the vendor’s agent directly and ask information on current bids, then make an offer that is marginally above the highest bid.

Consider a HUD House

A HUD foreclosed house is one that was purchased with mortgages insured by the national government. The land extends to market about six months following foreclosure and can be bought by anyone. There is a pecking order of buyer preference, but starting with the local government down to the property investor. Be aware that HUD homes tend to be found in less-than-desirable locations and frequently require significant repair. However, their benefit is that the buyer will know the acceptable price of the house, because HUD upgrades its appraisals regularly. What’s more, inspectors agree that HUD houses are generally better protected, because the national government will usually take steps to winterize the house and implement additional small touch-ups.

See related