Foreclosed Homes: A Good Investement Option
Buying a foreclosed home used to be a nightmare. This was because one had to follow auctions put out by courthouses or go through mountain of legal filings. The subprime meltdown however led many banks to start selling seized homes through real estate agents. This made it easy for one to find a home. But how is this so? Well, one has to know where to real look for these homes; be cautious about the auctions; learn to negotiate and have patience.
Sources
The search for homes and properties in foreclosure could be done by consulting relevant websites in the internet. Other important sources of information are the listing services and real estate agents.
Be wary of public auctions
Most of foreclosed properties are sold at public auction, which have a number of downsides. At auction the property is paid in cash at the time of purchasing, therefore, one cannot use a mortgage. Secondly, the buyer has no privilege of inspect the house before buying. The like hood of a buyer ending up with a house rife with structural and cosmetic damage to the structure, termites or pest infestations, among others are high. Besides, majority of auction properties have liens attached to them, either by the IRS or the state, or other creditors. These drawbacks can be circumvented by dealing with banks. This is so because one is given the opportunity, by the bank, to inspect the property before buying. Secondly, bank properties can be purchased through mortgage. Lastly, banks pay off any liens attached to the property before reselling it.
Comes in the contractor
Obviously most foreclosed properties suffer from great structural problems. With such a property it is wise to hire the services of a contractor who will itemize and estimate the cost and material required for repairs.
Negotiation
Buying foreclosed properties from a bank is a pricey issue. Banks add value to these properties. As a buyer it will be advisable to begin the bargaining process with a lowball offer. Banks with sizable foreclosed properties will be keen to negotiate on a price, especially if the properties have been held for a longer period of time. One can thus start with an initial offer of price of 20% below the current market price, or even more if the property is in an area with high incidence of foreclosure.
Patience
It might take longer for one to get a response for his bid. A bank with inundated with foreclosures might take longer to response to requests. It might even take over 90 days before getting a response. Submitting several bids at once is therefore advisable. For buyers bidding with banks, they should also consider getting a preapproval for a mortgage. Foreclosure deals have a high rate of failure, and possibility of a deal not going through exists till the deal is closed.
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