Buying a foreclosure with confidence can be an empowering experience with the right tools. Knowledge of foreclosure laws, investing techniques, property records and home inspection procedures are essential. It is anyone’s guess as to when the housing downturn will finally hit bottom. But, if you are looking to buy a home now, and plan to stay in it for a while, then there are plenty of bargains to be made on a foreclosed property.
The first step is to make sure the property is available. Many online websites offer many foreclosure properties. Yet, after a little bit of investigation, they find that they are old property listings that remain on the website in order to prop up the website numbers. The best way to avoid this potential roadblock is to drive by the property first. This also enables you to check for “for sale” signs, location and overall appearance.
The most common mistake that many foreclosure investors make is that they pay too much for the property. As a consumer, learn the difference between market value, appraised value and assessed value. All counties provide vital resources such as a history of tax records, liens and judgments. In the county assessors office you can review property assessments, confirm previous sale dates, square footage, number of rooms, easements across the property and taxes paid. In the record room of the county clerk, you can obtain additional information such as UCC filings, judgments, a chain of title and liens against the property.
Of course, it’s never a bad idea to seek to be pre-approved for a mortgage prior to shopping for a home. However, it’s even more important if you’re shopping about for a property which has been foreclosed. Even a person with excellent credit might find it difficult to get a loan if the property is a distressed one. Still other lenders might offer a mortgage on the sought-property, but only if the house is in pretty good condition. If you find a loan officer who expresses a willingness to make a loan on a particular foreclosed property, it’s important to ask what criteria the home must first meet. The lender will normally allow some cosmetic repairs, but he will often frown upon termites or other serious problems.
Being familiar with the lingo is also helpful. We have learned many new real estate terms with the onslaught of the foreclosure crisis. You may hear a piece of property being referred to as “REO (real estate owned) property. This means that the lender owns the real estate. Owners who can’t pay their mortgage payments may sell their homes in a “short sale,” which is an agreement with the lender to sell the house for less that what is currently owed. This will help the owner to avoid having the foreclosure put on their credit report. If the bank has already taken control of the property, the bank will refer to sale of the house as an auction.
When searching for online foreclosures, concentrate on those listed without pictures. Most consumers prefer all information prior to viewing the property physically. In the days of virtual tours, digital cameras and effective language, it is beneficial to go back and review what others may overlook in order to find the best deal. Just because a bank does not provide a picture does not mean the property is not worthy of a drive by.
Search in places that you are familiar with. When you stay within local areas, you are familiar with where the truly bad areas are, enabling you to know where to search and where not to search. You are also more familiar with what areas have the best potential from simply living in the area. Also, the local papers can inform you of what areas are being revitalized by the local cities. This is the key to getting a good buy on any real estate deal.
Is your home brand new? Getting a home inspection is still important. However, they’re all the more important if the home in question is in foreclosure. A homeowner who is having difficulty paying his or her bills might delay regular home maintenance. Then, the tank seizes the home, and it usually sits vacant. During that time, it falls into an even greater site of disrepair. In a few rare examples, the homeowner gets so angry with the situation that he or she purposely destroys the property before they move out.
Without an inspection, you will not be able to estimate the cost for repairs or be able to report the home’s actual condition to your lender. It’s of the utmost importance that you get a full home inspection if you’re considering buying a foreclosed property. The property will almost certainly be offered “as is.” This means you accept the property with all of its hidden damage and defects. Therefore, if you buy a foreclosed property before you’ve gotten an inspection of the property, you’re assuming all the liability and risk when the deal is closed.
Very often, at the time of your viewing and possibly at the time of your closing on the property, the essential utilities may have been switched off because of non-payment of the previous bills. This effectively means you are not able to see essential features such as electricity, water, A/C, heating, plumbing, appliances, spa, pool, security system, etc., working correctly. It is imperative that before you part with any money (unless you want to take the gamble) that you arrange with the appropriate authorities to have the services switched on for a minimal period for testing. When you have this arranged this is your last chance to inspect your property and determine if the services are working or if it has been a victim of malicious damage. By spending a few dollars on a home inspection, you may save yourself thousands of dollars. It will give you the piece of mind knowing that you have done due diligence.
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