You're probably scratching your head wondering how hard can it be to buy a foreclosure these days? They are lining every residential street. Well a few months ago I'd have said very easy, today however the buyers are out in full force and well priced foreclosures are selling in days and at prices over the asking. How is that possible with the state of real estate in such decline? Easy, buyers are recognizing great deals and are ready to take the leap and buy.
So if you are thinking along these lines a few words of advice may help you.
1. Be Prepared to Move Fast on a Well Priced Home in Good Condition.
As you start looking at homes you'll see houses that need cosmetic repairs such as paint and carpet. Some homes may need a few extras. These can include faucets toilets doorknobs and ceiling lights/fans. These repairs are common and depending on the extent can be easily fixed or replaced at a minimum of cost. After seeing dozens of homes needing the same repairs you finally walk into a home that looks like the owners actually took care of their home. The carpet is clean and in good condition, walls are clean and a minimal of touch up may be required. The home is clean. This is the home everyone wants and for obvious reasons so if you plan on offering on this home beware of competition and deep pockets. And don't be surprised if the home sells for more than the asking price.
2. All Banks Want the Same Thing in a Offer
Instructions for putting in an offer are usually simple. They don't want all the fluff agents normally send. Which means they don't want all the disclosures clogging up their overloaded fax machine. All they want are these simple items;
The 8 page offer signed by the buyer.
A pre qualification letter
A copy of the deposit check
Proof of funds for a down payment or cash offer.
Some banks (namingly Countrywide and Wells Fargo) request the buyer be pre-qualified by one of their lenders. This of course is a pain but if you want to offer on the house you better do it because there are no exceptions. You don't have to use their lender they just want to verify your lender has pre qualified you correctly.
3. Low Ball Offers
Every buyer out there thinks the same thing...they can offer $100,000 less than asking and the lender will accept the offer and thank them...WRONG
Banks don't deal that way. In reality if you offer more than $20,000 off the asking price you risk that bank just declining the offer.
Unless there are several offers on a home, don't hesitate to offer less but if you really want the home and it's well priced try to stay within the $20,000 range, banks want to sell their foreclosures but they won't give them away unless they have to. However, that doesn't mean some banks won't go lower. Look for homes that have been on the market for a while... atleast 100 days. These homes often require more extensive repairs and thats why they haven't sold. Another reason they may remain unsold is the bank has started at a high price. If you come across a home like this don't be afraid to offer less but be prepared for a refusal rather than negotiations.
4. Don't Fall for The Unbelieveable
You've spent the day looking at homes and one stands out above the rest. It's wonderfully upgraded, it's obviously been well maintained and is priced below other homes that are in much worse condition. These are the homes to steer clear of, no matter how much you love it unless you don't mind paying more for a home that doesn't need work.
This listing agent is employing an age old trick that will likely drive the price far beyond asking. It's priced low for multiuple offers. These homes usually show up on the MLS on a Thursday evening. People flock to this bargain and offers start rolling in immediately. But the agent wants everyone to have a chance so no offers will be presented til MONDAY (isn't that thoughtful). By Monday evening every single buyer who put in an offer gets a reply from the listing agent asking the buyer to reply with his best and final offer. So now more offers roll in with even higher prices and then get sent to the bank for look see. If you want a bargain stay away from these tactics.
If you buy a foreclosure always get a home inspection immediately.
Usually after 7 days your contingencies are removed and you no longer have the opportunity to cancel without sacrificing your deposit. So be sure this is the home you want.
Banks charge for delays, so your lender better be on the ball or you'll be paying the price. This can be a minimum of $100. per day and up for going past the escrow close date even if it's escrow or the sellers fault.
If you have a good agent who knows the foreclosure market you'll be far better off that retaining the services of an inexperienced agent, friend or family member who dabbles. Remember, you're making a very large investment so trust a professional to help you.
