Buying a foreclosure is not for everybody. There are some great benefits, namely price, but in exchange, there are some obstacles. Here’s what you need to know about buying a foreclosed property.
- The property you are buying is being sold “as-is”. When buying a house, sometimes you can request that certain repairs are taken care of as a condition of the sale. This is not typically an option with foreclosures. In fact, many foreclosed homes will be in need of repair. So, it is advisable that you are sure you have the ability to take care of necessary repairs before you buy a foreclosed home.
- Get a pre-approval letter from your mortgage broker. The seller of a foreclosed home is generally a bank. They will want to know that you can back up your offer when you make it. Getting a pre-approval letter is a fairly simple process. Your lender will want to know things like your income, your debt-to-income ratio, assets, and a general overall financial picture.
- You should know the “comps”, or the listing prices and recent sale prices of homes in your area. Prices of comparable homes in the area of the foreclosed property that you are looking to buy will set the standard. If you know what the comps are, you’ll know how much of a deal you are getting.
- There are three different types of foreclosures. The three different types of foreclosures are: strict foreclosures, judicial foreclosures, and non-judicial foreclosures. Strict foreclosures are only available in certain states. Non-judicial foreclosures do not require court approval as long as it is carried out under the terms of the power of sale clause featured in the deed of trust and the state’s foreclosure laws. Judicial foreclosures are probably the most common type of foreclosure, as it is available across all 50 states. In these cases the lender must rely on the court to foreclose the property. The home’s original owners have the opportunity to make all back payments once the are given proper notice of the lawsuit. Failure to pay the debt will result in an order from the court allowing the property to be sold in a public auction held by a representative of the county court or sheriff’s department. Your Realtor® should be able to guide you through each of the different types of foreclosures.
- Working with an agent who knows foreclosures is the smartest way to ensure a successful process. There are a lot of ins and outs of foreclosures that a knowledgeable Realtor® can guide you through. They can guide you to the best stage of the foreclosure process to get involved. A real estate agent who is well-versed in foreclosures can assist you in understanding the different stages of a foreclosure, allowing you to get ahead of the process, and secure the best deal for you and your family. This is a very important step to a successful purchase.
Taking advantage of foreclosure pricing is a good idea, as long as you have a great teacher along the way who can warn you of any potential pitfalls. A professional Realtor® can lead you into making a successful purchasing decision, and help you decide if buying a foreclosed home is right for you and your family.