What to Know About Buying Foreclosed Homes

Real estate investors looking to land a nice deal home need to look into the inventory of foreclosed properties in the area where they reside. Although the discount are not as deep as they were two or three years ago, you can still find cheaps houses in many locations.

Keep in mind that banks that hold titles to these repossessed homes are not in the business of owning real estate. They must show these non-performing assets on their books –bank owned homes have a negative effect on their bottom line.
You may receive a significant discount depending on market conditions in depending on overall market conditions in the area where you live.

When  purchasing a foreclosed home — either as an investment or a personal residence–the process works a bit differently than it does for traditional home sales.

1. Gathering Basic Information

Unlike buying other residential real estate, you will not have easy access to as much data with foreclosed homes because will be dealing with a bank that does not have as much information about the property. In a traditional residential sales transaction, the homeowner has a legal obligation to make certain disclosures about the home. On top of that , they  can give you the age of  building systems-roofing, electrical , heating and plumbing, and warranties  as well as valuable  other insights about  the property and the  neighborhood .

2.  The “As-Is” Sale

Many foreclosed homes are in major disrepair. It is not uncommon for  properties to be stripped doors, windows, plumbing fixtures, heating equipment, light fixtures, etc. by  former homeowners or vandals.  If you have the skills and resources to make the repairs, you can receive a hefty discount. It is critical that you perform a detailed home inspection to determine what repairs you will need to make, and the cost. This will strongly impact what offer you should make for the property.

3. Making the Offer

Make sure that you do your homework and find out what property values are in the neighborhood where the foreclosures is located. You will also need to find out reason still prices for bank owned homes or REOs sold by banks. This will give you good idea of how to structure your offer so that you avoid making an offer that is too high or too low.

Find out how long the property has been on the market. This will give you an idea of how motivated the lender may be to sell the property.

4.  Different from a Traditional Sale

The process for buying bank foreclosures differs from buying from a homeowner. Each institution has their own process for purchasing REOs. It is usually, large banks have their own department in place for handling patent on assets. Some have websites or will lose bank owned properties with local real estate agents in periods in smaller areas they may have one person within the bank that handles bank foreclosures.

As part of your due diligence, call the bank ahead of time to find out what their guidelines are for selling REOs. Find out the bank’s policy regarding home inspections.

5. The Time Line

You will need to be patient after you present the offer to the bank. A homeowner may respond to you offer within a matter 2 or 3 days, or even minutes in some cases. Offers for bank owned homes may have to go through multiple levels of review before receiving final approval. The process can take weeks, especially if you are dealing with a large bank.

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