I have investors that I sell properties to, to either flip to resell or to rent out. Some of these investors know just what they are looking for. They don’t hem and haw – it is either yes or no. I want it or I don’t. Often times these are homes that have been foreclosed on by banks.
I have other buyers who want to get into the action but are not sure on how to go about purchasing a foreclosed home. There are a few things that you should inquire about if going that route.
1. When is a good time to buy a foreclosure?
A: This varies market to market. You should check with your real estate professional. I have seen several good deals in recent weeks. These deals will not last if they it is are good. So if you are serious, don’t hesitate.
These deals will not last if they it is are good
2. As a buyer, what is the first thing I need to do?
A: A buyer should always be pre-approved if getting a loan. If you own a home already, you must keep in mind that banks and mortgage companies will treat this as an investment property because it is a second home. In this case, it will be more difficult and more expensive to purchase than if it was a home that you would be living in. Also, due to this being considered an investment, you will most likely pay a higher interest rate and need to put down a bigger down payment.
If you are paying cash, most bank owned properties will want verification of funds from your bank. All you need to do is have your bank write a letter that you have the funds in the amount of your offer price.
3. How can I tell if this foreclosure is a good one to buy?
A: There are many things to check and buying a property like this can be tricky. Sometimes there are unpaid liens against the properties, including an unpaid mortgage, lines of credit, back taxes, municipal liens, and more. “Any or all of these financial obligations could become your clientsâ€™ responsibility when they purchase a property in foreclosure. Unless the property goes through a foreclosure auction and becomes a bank-owned REO, the outstanding foreclosure liens and fees could be simply transferred to the new ownerâ€”your clients.” – According James J. Saccacio is chief executive officer of RealtyTrac.
Another tricky thing is getting the property inspected (one thing that you should always do on any property). Sometimes the utilities are off and sometimes the buyers may have to assume responsibility if they are turned on for inspections – such as if there is a water leak, etc. . .
4 What costs are involved in buying a foreclosure?
A: A buyer will make a quicker profit if paying cash. In some cases the transaction can also have a faster closing. Obviously if you pay cash, and have it rented right away, it is almost pure profit except for insurance, taxes and any regular repairs. Keep in mind that just because it is a cash offer, does not mean that the seller is going to necessarily take less. They still do want the amount they want whether it is cash or a mortgage.
In the state of Pennsylvania, your agent is required to give you the estimated costs of closing at the time of writing up your offer, so that will help you get an idea of what you will need to take to closing. Even when paying cash, you will still want title insurance to protect you from any unpaid liens that may pop up down the road.