“Ask Your Mortgage
or Bad Deal?
Hunting for the
foreclosure bargain, how do you know if you are getting a good deal or a bad deal? While buying a foreclosure can sometimes give you an opportunity to purchase a
home for less money there are certainly some risks involved.
Knowing and understanding these risks will help you make an educated decision on which home to
Working with a
Realtor will help you navigate through the purchase process, especially in the first group of
“Pre-Foreclosures”. This is where the homeowners are behind in
their payments and they are about to be foreclosed upon. If the
homeowners are honest with their Realtor, they have the best option of selling their home, even if it is a short
sale approved by the bank. Many banks are willing to take less for the property, in an effort to avoid the
foreclosure process. If the homeowners are involved it makes the
process easier. This can be a very difficult situation for
the homeowners as they face foreclosure. It can be especially
difficult, if the foreclosure is a result of a job loss, or some other unforeseen tragic event in their
lives. Having a third party, the Realtor to work for you can help
everything go smoothly in these difficult situations. Using a
Realtor who has experience in short sales will really make a difference in the final outcome for this homeowner.
As part of the
foreclosure process the home will be auctioned off on the court house steps, and sold to the highest
bidder. The lender who currently holds the note on the property
will definitely be bidding on the property in order to either sell it for the price needed, or be the highest
bidder in order to retain the property. Then the lender has the
opportunity to sell it later for the price they feel the property is worth. While this is viewed as the most risky way to purchase foreclosed properties,
it can also have the most potential for profit if the price is right. You need to be aware of several potential serious
consequences. If you are unfamiliar with the process you can end up
with a home that is inhabitable, un-financeable, and you may even over pay for the property. Inspect the property before the auction if this is possible. Be sure that you are pre-approved to purchase the home and have the financing
details worked out. Make sure your lender knows the condition of
the property, and what type of loan you are getting.
You may qualify as the borrower but the property may not.
Auctions are final; you will not get your deposit back. You may have to consider getting a construction loan
if the home will not meet lending guidelines for government or conventional financing. Make sure you will be able to get a clear title, with no clouds that will
hinder you from financing. Verify that the taxes are paid up to
date and not in arrears, or you will have to pay them as well.
Estimate all repair costs. In this situation, you need to count
the total costs involved, not just the auction sales price.
These are bank
owned properties. An REO occurs when the lender is the top bidder
at the foreclosure auction and they gain possession of the property. The lender is now in the position to sell the property in order to recoup
their losses. The lender will ensure that you have a clear title to
purchase this property, this includes making sure the taxes are current. In some cases the lender may even make some minor repairs to the property to
ensure they are able to sell it. However, all foreclosures sales
are sold “AS IS”. There is no warranty expressed or implied by either the lender, the Realtor, or any other
party involved in the sale of the foreclosure. While this is the
most common method of purchasing a foreclosure it still has some risk involved. Do your homework. Work with a
Realtor who has experience with foreclosed properties and ask them to research the homes history (no previous
meth labs, flood damage, mold, defective drywall etc.). If
work is needed get bids for the repairs, so you know the total cost of making your house a home. Read the contract carefully.
Knows what the seller expects from you and what to expect from the seller when purchasing a foreclosed
home. Negotiating the contract with the bank is different than
negotiating with an individual homeowner.
If you have questions or
comments please email them to firstname.lastname@example.org
Call Andrew today at 573-302-0600.
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