Real estate has taken a beating recently. One of the few silver linings in this downturn in real estate values is that there are now a lot of foreclosures available on the market. This offers a real chance to get a good deal on property. However, you should know a few guidelines before you set out to buy a foreclosure.
Foreclosures are properties that have been repossessed by the bank due to default or turned over to the bank willingly. Once the property deed is turned back over to the bank, it will then put the property up for sale again in an effort to recoup its investment.
The first thing you should do if you want to buy a foreclosed property is to get pre-approved. You need to get a copy of your credit report and review it for errors. Clean up any errors in your report. Then, take all of your paperwork, including your tax returns for income verification and employment history, to your lender so you can start the pre-approval process. Once you are pre-approved, you are in a much better position to negotiate and be taken seriously.
Get an Agent
The next step is to get an agent. However, you don’t just want any real estate agent. You want one that works specifically with foreclosures. Of course, you have the option to go it alone, and this might not be a bad idea if you were in the market for a traditional property. However, since you are looking at foreclosures, it’s best to enlist the help of an agent. One way to find an agent who deals with foreclosures is to search the real estate listings and sort by foreclosures. They will usually have agent information included. These agents work closely with the banks, and often know of properties that aren’t even listed yet. That is your inside track.
Know the Market
If you already have a home, make sure you study comparable home sales in your area. You’ll want to know the price range and length of time it should take to sell. This will prevent you from pricing too high or too low.
“As Is” Really Means “As Is”
Most of the foreclosure listings will include some language stating the property is sold “as is”. This means exactly what it sounds like. A lot of these homes have been sitting vacant for a while. Some also need repairs. All of this is part of the bargain when buying a foreclosed home. This doesn’t mean there aren’t good deals to be found. Just know what you are getting into. The listing is generally going to be thousands less than it would’ve been if not in foreclosure. Use some of that money for clean-up and minor repairs and within a couple months, you will have a new launch property (search here!) ready to move into or put back on the market for a profit.