Buying foreclosed property is a little different from buying typical homes for sale. In most cases, only one real estate agent is involved, and the seller wants an approval letter from a lender before considering an offer. There is rarely room for negotiation, and the property comes “as is,” with repairs left to the buyer. On the positive side, foreclosed homes are vacant, which speeds up the process of moving in.
Buying a foreclosure is definitely a grind. It’s not for the squeamish. But in doing so you can find prices on real estate that would otherwise be unsuitable for your budget.
What Should I Do First?
The first step in buying distressed property is two fold and should happen simultaneously: 1) get a preapproval letter from a lender, and 2) find an agent who specializes in flipping foreclosed property.
You can accelerate the first step by visiting real estate websites that contain foreclosure databases. You can also visit local websites that allow you to filter the results to see only foreclosed properties. Look for the acronym “REO” (Real Estate Owned), which means it’s owned by the bank. That means the home has been through foreclosure. It’s for sale!
The goal of perusing through databases isn’t to find home for sales, per se. It’s to find a local agent. Banks generally hire one or two of these to handle all of their REO properties in a specific market. In many cases, buyers work with real estate brokers and not agents. That means the commission generated by the sale goes to one person, not two.
Most brokers have long established relationships with the banks. It’s good to find out who they are and where they work. You can find out who they are by contacting your local real estate company.
Some banks want strong offers, while some want strong buyers. This is contingent upon the bank’s preference, not the agent’s. The bank may choose the most appealing buyer, which can mean different things depending on the bank. Some banks may make their choice based on the size of the down payment. Though offering large cash payments may bring down the asking price, it’s not typical. The best thing you can do at this stage is surround yourself with a solid team from a real estate agency.
Close On Time
There is no leniency in a short sale’s closing escrow date. Exceptions are rarely made and you must close on time. Therefore, it’s important to take care of all paperwork immediately after opening the escrow. Set your loan closing date with the bank ahead by at least 2-3 days of the closing date. Clearly document each step, because if you do need to ask for an extension, the bank is going to want to know that all criteria were followed to the T.
Short sales, foreclosures and distressed property provide great ways to find new homes for sale. First-time homebuyers purchase around 33% of these kinds of properties. It’s becoming a booming market for young buyers and for those deciding to ditch their rental keys in favor of ownership.
Be sure to contact an experienced real estate broker today about purchasing your dream home!
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