Posted on: 9 March 2016
Buying a foreclosed home can be a great way to get more home for your budget. However, it also has its intricacies. When you buy a home in foreclosure, you usually buy it as-is and agree to be responsible for any needed repairs. There's not a lot of room for negotiation, and the process tends to move very quickly once the ball starts rolling. If you're hoping to buy a home in foreclosure, there are some steps you can take to ensure the process goes smoothly.
Work with a realtor who specializes in foreclosures.
Different realtors have different specialties. Someone who regularly buys and sells foreclosures will know the market better and will be able to ensure you're shown foreclosed homes before they are swept off the market. Realtors who have experience with foreclosures will also be better versed in the required paperwork for such sales, which should lead to fewer hiccups and delays throughout the process.
Get pre-approved for a loan.
"Good" homes that are being foreclosed upon go quickly. If you have to wait three days for the bank to process your paperwork and approve you, you'll probably lose the sale to someone who was pre-approved and was able to act more quickly. You can prevent this problem by getting pre-approved yourself. Shop around for mortgages at a few banks and credit unions to get the best rate. Then, remember to bring a copy of your pre-approval letter with you whenever you go to see homes. If you find "the one," you'll be ready to jump on it and start the buying process without delay.
Always have a home inspection.
It's easy to fall into the trap of thinking you're saving a bundle on a home, so there's no need to have it inspected because you'll have plenty of money set aside to deal with issues. However, there are some issues -- like leaky foundations and decaying roofs -- that are a real hassle and expense to deal with.
The bank might decide they won't approve your home until you have these issues fixed, and then you'll have to choose between spending a fortune to fix the home and walking away from any money you've put down already. Always have a home inspected -- especially when buying in foreclosure -- since in foreclosure, there's no room to negotiate with the seller when it comes to repairs. This way, you'll be certain of what you're getting into before you put down any earnest money. A decent home inspection will cost around $400, but it will be $400 well spent if you find out about a problem that would have cost you thousands to fix or would have made the home unmarketable in the future.
Consider the home's resale value.
Maybe a home meets your needs, but will you be able to sell it in the future? With the speed at which foreclosure sales move, many buyers forget to ask this question. And as a result, they end up with homes that are hard to sell five or ten years down the road. Aim to buy a home in a good school district, even if you don't personally have kids. This will make it easier to sell when you're ready to do so. Some other features that will make a home easier to sell later on include:
- Outdoor living space (If the yard is not nice, consider whether you could affordably make it so.)
- Plenty of storage space
- A two-car garage
- Easy access to community amenities, such as the library, parks and playgrounds.
If you work with a realtor who specializes in foreclosures, make sure you get pre-approved for a loan, shop for a home that will be easy to resell, and have the home inspected; you'll protect yourself from a lot of the challenges that come with buying a foreclosure. Follow the link for additional reading on buying a home.Share