Tips For Buying A Foreclosure
April 6th, 2009 categories: Buyer Resource
The good news is that for qualified buyers, there are below market offerings in just about every price range, and location. It must also be noted there are can be lots of competition for bank owned properties, and for this reason, I am writing down some tips to help you get the bank owned home you want.
I have put together a list of tips, which have helped buyers find a single diamond in the rough, even with the large amount of inventory on the market.
Know where you are going!
Begin your search by knowing what you want to achieve. Just like Stephen Covey says in his book The 7 Habits of Highly Effective People, “Begin with the end in mind.” Have a clear, achievable goal, and work towards that goal. Your goals should be SMART GOALS:
Specific
Measurable
Attainable
Realistic
Timely
You should start by answering the following questions (as well as others that are important to you):
Where would you like to live?
How much would you like to spend?
Do you want a fixer upper, or a property that is move in ready?
Have a professional on your side!
Make sure you are working with a reputable Real Estate Agent who has a successful track record of closing REO deals. You need an agent who works in Real Estate full time, has a strong work ethic and one that goes back for continuing education on a regular basis. Make sure you know the credentials and track record of your Real Estate Agent.
Do your homework!
Simply because a property is a Foreclosure, does not make it the best deal. Make sure comparable sales support the price you are going to pay. Ask your Real Estate Agent for a CMA for that property, and neighborhood. The CMA (Comparative Market Analysis) will give you insight into the current market around the property of interest. This report should include 4 types of properties/listings.
Active Properties – These are properties that are listed for sale, but do not yet have an accepted contract in place.
Pending Sales – These are properties that are “in contract” but have yet to actually close and record.
Sold Properties – These are properties that have been listed, and were sold to a buyer. These prices, as long as they are recent solds (within the last 90 days) are the best way to know what the current market is in terms of comparable prices.
Expired Listings – These are properties that were priced at a level above where buyers were willing to pay.
Know your competition!
Ask how many offers there are on a property! The more offers there are, the greater the chance of needing to submit a higher offer, many times, over asking price. In the event of multiple offers, the bank may choose to not accept any offer, and send out a notice of multiple offers, asking all who submitted offers to submit one last “highest and best” offer. The bank will choose a single offer to accept.
The fewer the offers, the greater the chance of getting a property below market value. For this reason, it is smart to view properties as soon as they are listed on the market.
Many banks will work with the first offer that comes in. It is suggested you act quickly on any bank owned home you are interested in, as the banks are in the Business of lending, not the Real Estate Business, and want to liquidate inventory quickly.
Look like a ready, willing, and able buyer!
Be sure to have a preapproval letter accompany any offer you submit. This will show the bank (seller) that you are financially able to close the deal. It may also help to be preapproved with the bank/lender who is selling the property, as they are more likely to believe their own preapprovals as opposed to the preapprovals of other banks.
Also, shortening the length of contingency periods (inspection, financing, etc…where possible) can also make you look like a more serious buyer. The bank, more than anyone, knows the time value of money.
Cash is king!
If you can afford to pay cash for a home, this may give you a unique position in terms of bargaining for a lower cost. There are many aspects to an offer. A bank may be more likely to accept an offer that is all cash, even if it is not the offer with the highest amount.
Make sure you have inspections done on the property!
Hire a licensed home inspector to go through the property. There is a cost for inspections, however, this is money that is very well spent. We suggest that ALL of our buyers have inspections done on any property they purchase.
Ask for repairs/negotiations AFTER you are in contract!
Do not ask for repairs/concessions up front in the initial offer. If there are issues found, ask for them after inspections, when a professional estimate can be given to the bank. The bank has little to no knowledge of the property, and a professional inspector is a neutral third party, who is giving an opinion based on a professional license. The bank is more likely to accept this as truth, rather than a “guess” of damage amounts up front.
To start receiving free lists of foreclosures in Sonoma County, be sure and visiting WineCountryMoves.com
