Thinking about Buying a home and think you want to look at Foreclosures? Here are 5 tips that will help make the process much easier and enjoyable. Daren Blomquist weighed in on the purchasing process of foreclosures in a recent Business Insider article. Some of his comments are below.
“The No. 1 reason to buy a foreclosure is the potential for a good bargain,” says Daren Blomquist of RealtyTrac.com, which follows the U.S. foreclosure market. “Distressed properties have always come with a built-in discount — even before today’s foreclosure crisis. Foreclosures might not be for every buyer, but we believe they represent a great opportunity for many buyers,” Blomquist says.
Still, he recommends would-be foreclosure buyers tread carefully.
After all, foreclosed homes are typically sold “as is” (suggests the buyer is accepting the property in it present state and relinquishes and responsibility from the buyer.) Some ex-homeowners also damage homes on their way out the door, while other properties sit vacant for months or years — attracting vandals or falling further into decay.
How can you tell the good from the bad and the ugly? Here are five things smart foreclosure buyers should always do:
Tip No. 1: Focus on REOs if you’re a novice
Blomquist says inexperienced buyers should probably steer clear of foreclosure auctions and possibly even short sales, focusing instead on REOs.
After all, short sales can involve lengthy negotiations with lenders for approval, while foreclosure auctions require all-cash payments (you can’t take weeks to secure a mortgage). You also can’t inspect a home that’s facing foreclosure auction, as its current residents technically still own the property and don’t have to let you in.
By contrast, REO deals are very similar to traditional home sales.
Lenders typically hire real estate agents to show REO properties to would-be buyers, and also allow home inspections and the use of mortgages to finance purchases.At the same time, REOs generally offer the lowest prices of any distressed properties.
Blomquist says that because they’re often in the poorest condition, while banks frequently heavily discount REOs to promote quick sales.
“A bank isn’t emotionally attached to a REO — it’s just looking to recoup as much of its losses as possible,” he says. “So the lender is often more willing to capitulate on price.”
Tip No. 2: Inspect properties carefully
Assuming you follow Tip No. 1, you’ll have a chance to have a home you’re looking at professionally inspected.
That’s key, because most short sales and REOs are sold “as is,” even though their financially strapped former homeowners rarely kept up with the maintenance.
Blomquist recommends having a good home inspector go carefully over any foreclosure you’re thinking about buying. Then have your agent present the seller with a list of all problems and estimates about how much they’ll cost to fix, using this rundown as a tool to negotiate a lower price.
Tip No. 3: Set up financing in advance
Blomquist says many short sales and REOs are actually attracting multiple offers these days, so you should set up mortgage financing in advance. “Having your financing in order in advance is crucial,” he says.
He recommends getting pre-approved for a loan before looking at properties. You should also check your credit score, fix any credit problems and set aside enough cash for a down payment. RTP Living suggests speaking to a lender early on in the process. This will allow the lender to lay out a plan for you to follow so that you will have the best credit score possible and most cash available when it comes times to purchase a home.
Tip No. 4: Hire a good buyer’s agent
“An experienced buyer’s agent — particularly one who’s familiar with foreclosures — can really help you navigate the process,” Blomquist says. In this market we have have made foreclosures a large percentage of our business. We are constantly working with investors to find investments properties, first time home buyers to buy promising homes, and helping families upgrade their home while still remaining within their budget. It is this experience that allows us to work diligently to find the best foreclosure home for you as possible.
Tip No. 5: Research your market
Have your agent study your local foreclosure scene carefully and inform you on how much properties are selling for, how quickly they’re moving and how much a distressed home’s value will likely rise in the future. This will allow you to decide whether or not the purchase makes financial sense for you and your family.
“It’s important to not make the mistake of counting on any major price appreciation in the near term,” Blomquist notes.
We personally feel that there are a lot of great opportunities in the Triangle area for buyers to purchase a home below market value and gain value in their home in the near future. It just takes time to locate the right deal and trusting the right agent to navigate the process for you. If you have questions please contact us. We have experience with foreclosures and short sales in Raleigh, Cary, Wake Forest, Morrisville, and Garner and would love to help you purchase your next home, investment property, or your 1st home!
Looking to buy or sell a home in the Raleigh, Durham, Chapel Hill, Carrboro, Pittsboro, Cary, Apex, Garner, Hillsborough, Wake Forest, Knightdale, Clayton or any of the Triangle communities, we are here to help. Please consider us your Triangle Experts in all things Real Estate. Looking for great tips about Raleigh area real estate check out BenjaminPasswaters.com