5 Easy Steps for Buying a Foreclosure Property
A foreclosure occurs when a homeowner is unable to make full principal and interest payments on his/her mortgage, which allows the lender to seize the property, evict the homeowner and sell the home, as stipulated in the mortgage contract.
Buying your next home can be both exciting and overwhelming. You want to ensure that the home you purchase is right for you and that you have the right real estate professional to guide you. If you’re looking at investing in a foreclosure property, you’ll want to make sure that you have an agent who is experienced in the field and who can be a valuable resource in guiding you through the process.
How to buy a foreclosure property?
The 2 common ways of buying a foreclosed home are through a real estate agent or through a public auction.
Foreclosure properties are an affordable housing option, but there are also more things to watch for with this type of home purchase. Use this guide to better understand the steps involved in buying a foreclosure property and to increase your success in finding one that is right for you.
The first 2 steps in buying a foreclosure should happen almost simultaneously: Find a real estate broker who works directly with banks that own foreclosed homes and get a preapproval from a lender.
If you’re a first-time home buyer, you have to first visit a site with a database of foreclosed homes. You could also look at a local real estate website that lets you filter the results to see only foreclosures. You might find the acronym REO, which means "real estate owned" (by a bank, that is). This signifies that a home has been through foreclosure and the lender is selling it.
Auctions are another way you can access and purchase a foreclosure property. There are two types of auctions that may occur, a public foreclosure auction or public auction through an auction company.
2. Get a broker on your side
The goal of combing through foreclosure listings is not to find a house but to find an agent. An experienced professional can guide you through any additional paperwork that may come with buying a foreclosed home and can help you determine if the price is a good value.
And to prove that you're serious about buying, right before or after you meet with the agent, meet with the lender.
3. Get a preapproval letter
Before you start to shop for a foreclosure property, it is required to get a letter of prequalification from a lender, unless you want to pay cash. The letter will describe how much money you can borrow, based upon the lender's assessment of your credit score and income.
A seller is going to prefer working with a buyer who’s already secured financing rather than waiting around for someone who needs to get loan approval.
Some buyers want to find the house first and worry about financing later; however, those who are prepared ahead of time will see more success.
4. Pricing depends on sales pace
Pricing for a foreclosure property is typically set at market value in an effort to move the property quickly.
Just as with any other real-estate purchase, you have to look at the recent sales prices of comparable properties, or "comps." Go over the comps in today's current market conditions and write a competitive offer based on that.
In order to have a better understanding about your price offer, work with your agent, as they are an expert in negotiation and can help you come up with a good offer that the seller is likely to accept.
5. Don't expect a repair discount
Keep in mind that foreclosed homes are generally sold as-is. That means that you shouldn't expect to get a discount to compensate for repairs.
If you find that repairs are needed for your purchase, you may want to consider an FHA 203(k) Renovation Loan. An FHA 203(k) Renovation Loan is a mortgage that can cover the purchase price plus funds for renovation by financing the “as improved” value of the home.
Whether you're looking for a great deal on your dream home or seeking an investment property in Tuscaloosa and Birmingham Alabama, a foreclosure property might be perfect for you! Start your search for homes in foreclosure auctions, REO (real estate owned) homes and as well as bank-owned properties for sale. DSEAYCOM is a great source for foreclosure properties within the Tuscaloosa and Birmingham Alabama. If you’re looking for a foreclosure, an HUD home and more information about these two, visit the newest Alabama HudHomeStore to help you in your house hunting journey.
At DSEAYCOM, we’re happy to answer any questions you have about buying and selling in the Alabama area. Call us now or feel free to share our contact information with someone you know that needs expert help buying or selling their home.
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