Here are some tips to prepare you before buying a foreclosed home:
- Find an agent specializing in foreclosures.
- Get a preapproval letter.
- Look at “comps” before making an offer.
- Bid higher if other foreclosures are selling fast.
- Be prepared to buy a foreclosure in “as-is” condition.
- Find an experienced real estate agent
Hire an agent who is knowledgeable about the foreclosure process to represent your interests and will keep the transaction moving. One strategy for finding the right agent is to visit websites with a database of foreclosed homes in your desired area. If you find an agent you want to work with to buy a foreclosed home, ask them to look out for foreclosure properties that meet your criteria. These listings can go fast, so be prepared to move quickly.
- Get a preapproval letter
“It separates the lookers from the buyers,” he says. Preapproval letters detail how much money you can borrow, based on the lender’s thorough assessment of your credit score and income.
Find a mortgage lender who understands your goals, and gather the paperwork to obtain a preapproval letter.
- Look at ‘comps’ before making an offer
Finding the right price to offer is as much an art as it is a science. Your agent can run a comparative market analysis (CMA), which helps you understand recent sale prices of comparable properties, or “comps.”
- Bid the higher price if other foreclosures are selling quickly
There’s no exact formula on what the bank’s bottom line will be, so if foreclosed homes in your area are selling quickly, it’s important to work with your agent to craft a strong offer, backed up by your preapproval letter. In many instances, foreclosures are already discounted so an offer that’s too low might be a non-starter for the bank.
- Be prepared to buy a foreclosed home in ‘as-is’ condition
When purchasing a foreclosure, the property is usually sold in “as-is” condition. This means that the seller can’t guarantee the property’s condition, such as whether it has termites, structural issues or lead paint, for example, and is unlikely to make repairs.
Get a home inspection if you plan to buy a foreclosed home so you know exactly what you’re in store for. A home inspection isn’t required to buy a home, but it can identify major issues the bank isn’t aware of so you can decide whether to move forward with your home purchase — or to walk away from the deal if you included a home inspection contingency in your contract.
Content by JENNIFER BRADLEY FRANKLIN via BankRate.com