Buying a foreclosure can be a tricky thing to manage. You want to make sure that you’re purchasing a house that’s within your means, obviously. You also want to make sure that you’re doing your research and finding out all pertinent information for that foreclosed property.
Purchasing a foreclosed property is a little different than normal home buying experiences because, typically, there is only one agent involved, the seller wants a pre-approval letter from the lender before accepting the offer, there’s hardly any room for negotiation and the home comes “as-is” with the buyers being responsible for any repairs.
One of the first steps, or first two steps rather, when buying a foreclosure should happen at the same time. Buyers should find a real estate broker that works directly with the banks that own foreclosed homes and they should get the pre-approval letter from a lender. It is recommended that those shopping for homes to visit any site that contains a database of foreclosed homes.
Generally, the goal of looking through foreclosure listings isn’t necessarily to find a house but to find an agent. Banks will usually hire some real estate brokers to handle and facilitate the sale of their REO properties. This can be beneficial because some of these brokers will have access to or knowledge of listings that haven’t appeared yet. This creates a relationship between the lender and the buyer right away.
Most buyers aren’t planning on purchasing a house with cash. In that case, it is considered best practice to obtain a recent pre-approval letter from a lender. Preferably, you’ll have that lender be one that you’ve already established a relationship with. However, the lender will provide a letter stating how much money a buyer can borrow based on the buyer’s credit score and income.
The reason for obtaining the pre-approval letter is because the best deals on REO properties go rather quickly and that makes it that a buyer does not have the time to work out financing at a later date. Some buyers may also mistake that a bank selling a foreclosed home will also finance the mortgage. Essentially, the bank owning the REO property is simply getting rid of a bad asset.
Foreclosed houses will usually be sold “as-is” so a buyer should not expect the price of a house to come down simply because there are repairs needed. Buyers should look at the comps in the area and be mindful of that when it comes to the price of a foreclosed home. The usual recommendation for buyers is that they have tradespeople assess and repair damage from pests, mold, and leaks.
Purchasing a foreclosure is not impossible nor is it a scary thing to undertake. Simply knowing the process and understanding the basic aspects will assist buyers in successfully purchasing.