Buying a property out of foreclosure can be a very smart move, financially. But it can also be complicated, expensive, and stressful.
Here are 5 things to keep in mind before you make a decision:
1. You’re Buying The Home As-Is
Some buyers specialize in foreclosures while other investors run the other direction. There are pros and cons to this transaction so be prepared to pay the fee for a thorough property inspection even if you have experience. A third-party evaluation is essential if the home has been vacant for a lengthy period, if the utilities have been turned off, or if there are extensive visible defects.
Foreclosures can be like icebergs: What you see may be nothing compared to what lies beneath the surface.
Having the findings in writing is especially beneficial as you can confirm that your loan commitment and insurance quotes will be honored in spite of the existing conditions.
2. You’ll Need Access To Cash
Buying a house that has been returned to the lender through foreclosure means dealing with bureaucracy rather than with a motivated seller. Large lenders are notorious for taking their time to
approve a contract, even if the offer is for the exact amount specified.
Then there’s the paperwork, which may seem endless. In most cases as a prospective buyer you’ll need to have cash on hand or a pre-authorized loan before you can submit an offer.
3. Sellers Aren’t Open To Negotiations
In most circumstances there will be an opportunity for some discussion about the price, but that is not the norm in a foreclosure. The minimum price is set. Even if the property is on auction the minimum price will be set and the only direction is up!
4. You’ll Need An Experienced REALTOR®
Navigating the landscape of property foreclosures requires a certain amount of expertise if you plan on being successful. As a prospective buyer of a pre-foreclosure, a short-sale or a foreclosed home, an experienced REALTOR® is your best resource. A real estate professional will help you deal with the requirements, and has the knowledge and expertise to recommend lenders, inspectors, insurance agents and contractors to help you make the most of a foreclosure.
5. Does The Property Offer Future Value
Take the time to consider what can you expect in terms of appreciation over the short or long term. Does the neighborhood add value to the property or is this a neighborhood with tremendous long term potential. Will repairs and improvements add to the home’s value, or simply bring its condition up to standard? Do you plan to live in the home, or is it strictly for resale?
Your trusted real estate professional is the best resource to help you thoroughly evaluate all a foreclosure and the value it may provide. In the end, the decision is yours and will be dictated by your particular circumstances and whether purchasing a foreclosed property is a worthwhile investment.
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