Loading ...5 Tips for Buying a Foreclosure
November 23rd, 2007 by Tyler | 618 views |
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Searching for a home can sometimes be a very overwhelming experience, especially in today’s real estate market. With so many homes on the market right now, good real estate deals are increasingly difficult to find.
But…there are bargains out there, for people who know where to look.
If you’re willing to do some research though, you will find that the foreclosure market in Virginia, Maryland and Washington DC has some of the best opportunities for savvy home buyers.
HomeZillBlog.com gives consumers the opportunity to subscribe to receive a free weekly foreclosure and REO list in their area of choice. A number of real estate databases have already compiled a list of over 550,000 foreclosure properties across the country!
Foreclosure properties can be a great investment, or if you want to get more home for your money, it can become a more affordable option than buying a traditional property. But don’t get ahead of yourself because they’re not a way to get rich quick. You need to manage the purchase in an educated manner.
Here are five tips to help you land a deal on a foreclosure property:
1. Know the different types of foreclosure properties, and the foreclosure process.
There are three basic types of foreclosure properties, representing different stages in the foreclosure process: notice-of-default (NOD) and notice of trustee sale (NTS), which are both pre-foreclosure properties; and real-estate-owned (REO), a foreclosure property which has been re-purchased by the bank. Once the lender officially reclaims a home, it becomes a real-estate-owned property (REO).
Pre-foreclosure: (Notice-of-Default, Notice-of-Trustee
Foreclosure: (Auction sale) - High potential savings, Immediate property ownership
Foreclosure: (Real Estate Owned (REO)) - Significant time to evaluate property, Traditional bank financing, Lender often rehabs property
2. Get Pre-Approved
It’s important for a buyer to be pre-approved before engaging in discussions with a seller. This ensures that the buyer is in a financial position to purchase the property, and is in the strongest possible position to negotiate. Having approved financing in-hand makes negotiations with both the seller and the lender easier, and may even make it possible for the buyer to simply cure the default and take over the existing loan to reduce loan processing fees.
3. Contact a HomeZill Agent
“Buyer’s representatives” have the home buyer’s best interest at heart, and are determined to find the right property and negotiating the best price for their clients. They have access to reliable professionals (attorneys, lenders, inspectors and title professionals) to ensure that the buyer is in good hands and has an enjoyable experience.
4. Do your homework
It makes sense to give any property under consideration a thorough examination. Here are seven steps for doing a professional-level exam.
CHART: Foreclosure Examination Process
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• Identify desirable neighborhoods – Identify specific neighborhoods where you’d like to live or own a home. This will limit your search to a manageable size for you and your real estate agent, and give you a sense of relative property values. |
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• Determine the property value –Look at the original purchase price, and recent comparable property sales to determine the current value of the property. |
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• Find out the amount in default and the remaining loan balance – In order to determine a reasonable offer price, you’ll need to know—at a minimum—how much money it will take just to satisfy the debt to the lender. |
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• Run a legal investing report – Before purchasing any foreclosure property, make sure it is free and clear of any bankruptcies, tax liens or other financial liabilities. |
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• Assess the condition of the property– If at all possible, visit the property, ask your realtor’s opinion, and review pest and structural reports to make sure that the property is in acceptable condition, or to determine how much of a rehab budget you’ll need to build in to your deal. |
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• Build a positive relationship with the seller – Before purchasing the property, try to make sure that you’re entering into a win-win situation with the seller, so that they’ll do what they can to make the process easier and leave the property in good condition |
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• Leverage your timing – Knowing when a property is going to be auctioned gives you an extra bargaining chip when negotiating with the seller or the lender. |
5. Make a realistic offer
Two keys to a successful foreclosure purchase are diligence and patience. As a rule of thumb, the best savings can be made at the pre-foreclosure stage, where home owners can avoid a foreclosure and lenders can save the time and costs involved in going through the process. Another critical point in the process is immediately prior to the auction date, when all parties may be open to a last-minute agreement. It’s not unusual to save anywhere from 10-30% of market value on a foreclosure property, and certain properties offer savings of even 50% or more! These are definitely a rare find, but they’re out there, I’ve seen them with my own eyes! An educated buyer—one who knows how much is owed on the property and what its market value is—can usually come up with a realistic offer; one that offers significant savings, while meeting the requirements of the lender.
For a free list of foreclosure properties in your area, simply enter your email address in the box at the top of this page.
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This entry was posted on Friday, November 23rd, 2007 at 6:10 pm and is filed under Buyers Market, Foreclosure, Real Estate Tips. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
November 25th, 2007 at 6:09 am
[…] Check it out! While looking through the blogosphere we stumbled on an interesting post today.Here’s a quick excerptThis will limit your search to a manageable size for you and your real estate agent, and give you a sense of relative property values. • Determine the property value –Look at the original purchase price, and recent comparable property … […]
November 26th, 2007 at 4:48 pm
Does buying a foreclosure make it harder to get a loan? I am looking at a couple of properties that are foreclosures… Will I have a hard time with financing?
By the way, I do plan on using a Homezill agent
November 27th, 2007 at 10:38 am
Great question Jules- Loan approval is typically the same whether buying a foreclosure or a traditional property. However, the lender in possession of the foreclosed property may require you to get pre-approved through them before they accept your offer. In these cases, you may still use a different lender of your choosing as long as the foreclosure lender knows you’re qualified for a loan. Many times they will even offer loan discounts or small incentives, such as a free appraisal, if you obtain financing through that lender.
I’ve been seeing some great deals recently as the amount of foreclosure inventory has steadily risen. In Fairfax County, VA alone there are roughly 400 active foreclosure properties. Banks are getting desperate and I’ve seen many sell a good amount below the list price (which already was below market value)!
Glad to hear you plan on using our free services to earn additional cash back on your purchase!
For an email list of foreclosure homes in your area, enter your email address at the top of the page and a HomeZill agent will contact you regarding your criteria… good luck!
December 6th, 2007 at 3:57 pm
[…] Foreclosures in Virginia, Maryland and Washington DC have been fueling price depreciation and a glut of housing inventory over the past several […]
April 14th, 2008 at 3:10 pm
[…] So with that said, there are foreclosure homes that are fairly new out there. These foreclosures are in more respectable areas than the past and coming to more respectable […]