Buying a home cancan be stressful, and one of the main reasons for the stress is a financial concern. However, every once in a while, the real estate market offers a respite to home buyers by allowing them to buy a foreclosed home. The benefit of a foreclosed property is the price. Hence, there are many people in line to buy a foreclosed home. Read the guide to buying a foreclosed home to get a step ahead.
What is a Foreclosed Home?
A foreclosed home, or a foreclosure, occurs when a lender takes over the rights to the property when the owner is unable to or has fallen behind on payments on their mortgage. After claiming the home, these lenders will sell the home to get back their investment, even if it means selling it for less than it would be worth.
However, foreclosed homes are scarce in the market, especially because the 2019 pandemic saw homeowners able to live in their homes even with delayed or no payments. However, as the quarantine lifted, 2022 saw an increase in foreclosed homes.
Buying a foreclosed home isn’t as simple as it sounds, and there are many things that you must be aware of to buy one.
A Guide to Buying a Foreclosed Home
Buying a foreclosed home can significantly impact your finances, but the process is more complicated than buying a regular home. Hence, below is our guide to help you buy a foreclosed home.
1. Know the Options for Buying a Foreclosed Home
There are many ways to find and buy a foreclosed home. There is no one method for selling a foreclosed home, and each home can have a different approach. Knowing your options when it comes to buying a foreclosed home is essential so you can make the most out of the information and increase your chances. You can buy foreclosed homes through:
- Auctions: Most foreclosed homes are available on live auctions that you must register for after you have proven that you have enough funds to pay for the property. These auctions can either be on an auction site or online. Before you bid, it is essential to know how much the borrower owes, so you don’t end up paying more than it’s worth.
- From a Lender: You can find foreclosed homes on Real Estate Owned (REO) listings and check whether you like the house. Once interested, you can directly make an offer to the lender through a real estate agent.
- Pre-foreclosure: a homeowner is given 30 to 120 days to avoid foreclosure in which they might short sale. In a short sale, you can work with a real estate agent to find a suitable price that is less than the property’s actual worth.
2. Hire an Experienced Real Estate Agent
Foreclosed homes are challenging to find and price if you do it alone. Hence, you must try to work with an experienced real estate agent who knows the ins and outs of buying a foreclosed home. The right real estate agent can work with you and put their skills to use to help you achieve your goal.
Moreover, a buyer’s agent has an intensive contact list that can help you, from inspection to moving and renovating. You can find a real estate agent online or ask for referrals from friends and family. Check for reviews and ratings, as well as the real estate agent’s certification and portfolios, before you work with them.
3. Get Preapproved
Unless you can pay a lump sum, you will have to get preapproved for a mortgage before you make an offer for a foreclosed home. A pre-approval can help sellers distinguish you from the lookers and let them know you are serious about the sale. Consider what kind of loan you want, how much you want, and who you want to get the loan from. According to your requirements, you will have to see if you are eligible for the type of loan you want.
4. Look at Comparable Prices
One of the main things you must consider is how much you offer. Offering too little will make you unable to purchase the property while offering too much is just a lost opportunity. Your real estate agent can run a comparative market analysis to help you determine the right offer.
The agent compares the price of similar properties sold in the previous months and accounts for several factors before advising on a final price. Knowing the right amount to offer can help you compete without paying too much.
5. Understand That The Conditions Won’t be Best
A foreclosed home is often sold as-is. This means that there haven’t been any renovations or repairs made to improve the home’s condition. Hence, you must be prepared for the worst. While the house will be less costly, you might spend more on repairs. Thus, you must consider any repairs or renovations in your budget before buying a foreclosed home.
6. Get The Home Inspected and Appraised
The essential thing to do when buying a foreclosed home is to order a home inspection. A home inspection consists of assessing the property to look for flaws or potential repairs and calculating costs. An appraisal can help you value the property and compare it to the market. Hence, an inspection and an appraisal can give you crucial inside information and help you decide whether you want to buy the property.
Get Help Buying a Foreclosed Home
When buying a foreclosed home, there are several things to consider and procedures to go through. Therefore, it will be helpful to have someone experienced by your side to help through the entire process. Robert DeFalco Realty has several trained real estate agents specializing in foreclosed homes and can help you with every detail of the process.