While foreclosures have been on the decline, there were still 676,535 properties that were foreclosed on in 2017, from San Diego to Boston and countless cities in between, which means there are still plenty of homes going into foreclosure. Still, if you aren’t a professional real estate investor you may be facing stiff competition and a challenging process if you hope to buy a foreclosed home – for the best odds of success, here’s what you need to know.
Public Auctions or Banked-Owned Properties?
The two main ways of purchasing a foreclosed home is through an auction, with lenders auctioning off homes after the owners have stopped making their mortgage payments, or to buy after a bank has taken ownership of it. The latter is much easier for buyers who aren’t professional real estate owners as they’re sold by real estate agents and can be purchased just like you’d buy a home in the traditional way. The real estate agent that represents the bank will take your offer just like they would if they were representing an individual seller and come back with a counteroffer if the bank doesn’t like it, however always still conduct reviews on the real estate agents you come across, always better to be safe than sorry!
While homes sold at a public option often go cheaper, you can still save quite a bit buying a foreclosure from the bank.
Get Mortgage Pre-Approval First
Unless you’re planning to pay cash, you’ll need to get pre-approved for a mortgage first. The best deals on bank-owned properties go quickly and buyers often don’t have time to work out the financing afterward.
Get Estimates of All Repairs
When it comes to foreclosed homes, repairs are pretty much inevitable and can include everything from leaks, mold and pests to broken heating and air conditioning systems. Before you buy, be sure to get all the damage assessed and estimates on repairs from professional contractors so you know what you’re getting into. While owner-occupants who sell their homes have to tell you anything they’re aware of that’s wrong with them, banks that repossess them don’t, and they’re not likely to have a lot of knowledge about its condition.
Know What Similar Homes are Selling For
Search for homes that have sold within the past few months, looking at actual sales prices. While you won’t always be able to tell the condition they were in, you may be able to get an idea from listing photos. Eliminate those that seem to have very low prices as they may be transactions between family members that don’t reflect market value.
Give Them Your Best Bid
If the foreclosed homes you’re looking at are selling quickly, present your very best offer the first time unless the particular property has been sitting on the market for some time with no activity. As most foreclosed homes are sold as-is, don’t expect a discount to compensate for repairs.
This is a collaborative post. All opinions and text are mine.