A Guide to Buying Foreclosures

Transcription

1 A Guide t Buying Freclsures Use this step by step guide t better understand the freclsure market and the prcess invlved in purchasing these prperties. 9 Steps t help yu buy a freclsure.

2 A Guide t Buying Freclsures In tday s New Ecnmy it s a safe bet that regardless f where yu live there are numerus pprtunities fr buying freclsed prperty belw market value in yur wn cmmunity. And with a gd credit rating, many banks will even finance these purchases with little r nthing dwn. Hwever, even thugh the rewards can be significant, we ffer the fllwing advice: Unless yu are a trained real estate prfessinal, take the time t learn as much as yu can abut freclsures befre mving frward. There are challenges and risks assciated with these purchases. Take the time t becme prepared. In that spirit, we ffer the fllwing advice: 1. Begin by understanding that freclsed prperties g thrugh three distinct phases, each with their wn rewards and risks. It is imprtant t understand the differences and t be aware f where ptential prperty is in the prcess. Pre-freclsed prperties. These prperties can ffer deep price reductins but mre ften sell clse t market value. On average, these hmes sell within 5 percent f current market value. With mst pre-freclsed prperties, the prperty remains with the hme buyer. The Upside: The hmewner usually remains in pssessin f the hme and may want t sell it quickly t avid lsing it t the bank. With these mtivated sellers, a buyer stands a gd chance f striking an advantageus deal. Anther benefit is that because f the hme s built-in equity, these hmes can smetimes be purchased with a very lw dwn payment. The Dwnside: Even thugh it can be beneficial t a distressed hme wner t sell, these peple ftentimes are thinking with their hearts rather than their heads. A significant number f these wners refuse reasnable ffers fr their huse. Als expect cmpetitin fr these prperties frm seasned investrs. They keep an eye ut fr these types f prperties and are quick t act when they find ne. Als be prepared fr liens, ftentimes fr unpaid taxes, n these prperties. Sheriff sale r auctin prperties. Just as the name implies, these huses are sld t the highest bidder at a public auctin. The Upside: Mst f the time, the greatest savings and ptential return n investment can be fund n these prperties. The Dwnside: A large lump sum f mney is required the day f the auctin; ftentimes the prperty cannt be inspected in advance and nly ne persn wins at an auctin.

3 REO prperties. If freclsed prperty desn t sell at auctin t a third party, the lender then acquires the prperty t resell. While lending institutins are mtivated t sell these prperties, they aren t in business t give things away. Dn t expect them t start nw. The Upside: While nt as significant as with ther types f freclsed prperties, there is the ptential fr beating the market when buying ne f these hmes. Fr peple nt experienced in buying freclsures, buying bank wned prperty cmes with the fewest risks. Oftentimes the prperty will be sld by an agent much like in a traditinal sale. Previusly yu culd expect t pay clse t market value fr these hmes, but with tday s ecnmic cnditins banks have begun lwering their asking prices cmpared t market value in an effrt t mve inventry. The Dwnside: Negtiating with banks and ther lending institutins can be a cumbersme prcess. Expect the huse t be clean, but dn t expect the bank t have the carpet replaced r the walls painted. 2. Knw the difference between a freclsure and a shrt sale A shrt sale ccurs when a buyer agrees t sell his hme fr less than is wed n it. Shrt sales take place n prperties usually in the pre-freclsure phase. These sales ffer bth significant pprtunities and challenges. Alng with finding an wner wh is willing t sell fr less than he wes, the buyer in a shrt sale als has t cnvince the lending institutin t apprve the sale. While this can be difficult, it can be dne. Smetimes a bank wuld rather take a mderate lss n a prperty rather than prceeding thrugh the default prcess and taking pssessin f the hme. Just remember, shrt sales ccur when peple are in distressed situatins. Be prepared fr emtinal hmewners, difficult banks and red tape. 3. Make sure yu understand hw the prcess wrks in yur state Ask yur Attrney General. While freclsure prceedings are similar acrss the cuntry, the devil is in the details - and thse details vary frm state t state. Fr example, in sme states a lender has t sue the brrwer and get a curt rder befre being able t sell prperty. In ther states that is nt the case. Yu will be well served t cntact yur state s attrney general s ffice fr infrmatin n the laws where yu hpe t buy.

4 4. Get financing lined up early in the prcess Get preapprved fr a mrtgage. The preapprval prcess is cumbersme and ftentimes invlves a fee. D it anyway. It invlves cmpleting a mrtgage applicatin and a credit review. Mst lenders will charge a fee fr pre-apprving a lender. After successfully cmpleting this prcess a buyer will receive a cmmitment frm a lender t prvide a lan up t a certain amunt. Especially these days, the lending institutins knw hw difficult it can be fr a buyer t btain financing. Having that cmmitment in hand makes a buyer lk a lt mre serius t a hme seller and the lenders. 5. Find a buyer s agent wh wrks with freclsures Trust us n this ne: When buying a freclsure wrk with an agent wh knws the rutine. The agent wh will be cntacting yu with yur requested infrmatin n Freclsed Hmes and Prperties fr Sale is a highly qualified agent wh is familiar with the nuances invlved with buying a freclsure. 6. Start lking Already yu are ff t a gd start. The agent wh will be cntacting yu will use all f the resurces available t them t cmpile yu a current list f freclsures in yur area. Fr additinal infrmatin n freclsed hmes, search the fllwing surces: Gvernment agencies. HUD, Fannie Mae, Department f the Treasury and Small Business Assciatin ffer freclsed hmes fr sale. Cntact these agencies fr details n prperties and prcedures. Majr bank web sites. Many f the natin s majr banks list infrmatin n freclsed prperties n their web sites. Newspaper Legal and Real Estate Ads. Real estate agents. Many agents fcus n handling freclsures and keep a clse eye n what is cming n the market. Try t find an agent wh advertises freclsure sales. Drive the neighbrhds. If there are specific areas yu are interested in, drive thrugh them and watch fr the signs. Try t lk in neighbrhds where the freclsed prperty is the exceptin rather than the rule. Lk fr the ugly surrunded by the pretty. If yu have an pprtunity t purchase a wrn huse that lks shabby next t the ther nicely kept huses in the neighbrhd, seriusly cnsider mving frward. Even if yu have t spend additinal mney upgrading the hme, lcatin plays a huge rle in real estate markets. There can be great ptential fr eventual prfits with these hmes.

5 7. D Yur Due Diligence Find ut as much as pssible abut a freclsed prperty befre its prblems becme yurs. Take the time fr a gd lk and nt just at the fundatin. When pssible, tur the prperties. Smetimes hmewners are unwilling sellers and a tur f the hme isn t realistic. Other times it is. It desn t hurt t ask. Check public recrds fr liens that may be placed against the prperty, learn what yu can abut the neighbrhd and schl district and have yur agent research what ther hmes in the area are selling fr. Cntact a lcal title cmpany t insure yur upcming purchase. By ding this yu will get the fficial status f the title as well guarantee the title if yu are the successful purchaser. Remember, if the huse is underwater r if mre is wed n the huse than it is wrth, yu will need t get the lender invlved and try t negtiate a shrt sale. 8. Make an Offer If everything still lks gd, it may be time t pull the trigger. Be cautius, but dn t needlessly hesitate - thers als are lking at the prperty. If yu mve frward, have yur agent help yu determine the right ffering price. This can be an art. The lwer the ffer, the greater the savings r prfit. But the lwer the ffer, the greater the chance the ffer will be rejected. If allwed, have the hme inspected. 9. Wait Nw is the time fr exercising a bit f patience. Buying a huse in the freclsure prcess is mre cumbersme that a traditinal hme purchase. Expect significant paperwrk and time t pass befre this prcess cmes t a successful clse. Buying a freclsure is rich in pprtunity and prbably nt as difficult as it might seem. We hpe ur step by step guide helps in yur effrts t purchase a recently Freclsed Hme r Prperty.