With the current state of the Real Estate market, a lot of people are looking for tips for buying foreclosures. And they’re right, this is a nice time to be looking at buying Real Estate, either for you own personal use or as investment property. However, there are some things you need to keep in mind when negotiating to buy REO properties so we thought we would put together some tips for buying foreclosures for you.
First of all you must always remember when looking at foreclosures that the house may not have been lived in for quite a few months. If nobody has been looking after the property you may have some surprises in store on that initial visit. Keep an open mind but know that you may have to deal with an exterminator to get rid of rodents or insects. If the utilities have been off for several months you’ll want to have the plumbing checked to make sure there were no frozen pipes during the winter time that may have burst. And you’ll want to test the furnace, air conditioning and water heater to make certain they are in good working order.
You’re not the only buyer who’s interesting in buying foreclosures and the bank may receive dozens of offers for the property you’re interested in. Sometimes the lenders take all of the bids into consideration and sometimes they toss all but the two highest offers and then ask each of you to make a “Highest and Final” bid. Either way, with a little research you can make sure yours is the winning bid.
Ask your Real Estate agent to find out the lender’s purchase price or you can get this yourself from the tax rolls or a title company. Compare the original mortgage balance and also the foreclosure sale price and somewhere in between is the amount the bank will accept. You also need to look at figures for comparable sales in the area over the past 3 months. The market value of the house and the asking price are 2 completely different things.
You’ll know you can afford to raise your offer a little and still be paying less than the house is actually worth if the bank is asking a very low price as compared to the market value of similar homes within the area.
Get a pre-approval letter from your lender AND the bank or lender who holds the mortgage. You’ll be able to use your own lender when you close, however banks don’t trust approval letters from other banks. So if you’ve got also gone the additional step and can provide a pre-approval letter from the bank who actually holds the mortgage, too, you will look that much better.
Get to know various home inspectors and let them know you’re looking at purchasing a foreclosure property and ask them to be available. If someone else asks for 14 days to allow time for inspections and you ask for just 5 then you’ll really look good to that lender. One of the best tips for buying foreclosures is just to remember that the bank wants out from under that property as fast as possible. The easier you make it for them to award you the property the easier it will be for you to move into that new home.