With the housing market in the condition that it’s in these days, many prospective home buyers are interested in purchasing homes that are either foreclosed or in some stage of the foreclosure process. But buying a foreclosed home is different than buying a traditional resale property. In the case of homes in foreclosure, the seller often will ask for a letter from a lender showing preapproval for the home loan before accepting any offer. On the other hand, most of these kinds of homes are vacant which can make for a faster move-in process for the new owner. Purchasing a home in foreclosure is a challenge but the low pricing often makes it worth the trouble for most buyers.
So what should home buyers do if they are interested in purchasing a distressed property? There are some steps involved that every buyer will want to follow when taking this home buying detour.
1. Obtain Preapproval From a Lender
This first step is first because it is arguably the most important step in the process. You probably won’t get very much farther past an initial conversation with a broker unless you have gotten preapproved for a mortgage. Once you get written approval for the home loan then the other doors in the process can be opened.
2. Locate a Real Estate Agent Who Specializes in Foreclosed Properties
There are residential real estate agents who work directly with banks that own properties that have been foreclosed. Shoppers are advised by many experts to visit websites like ForeclosuresUS.com which have listings of foreclosed homes. Many local real estate sites also allow users to perform searches for foreclosed homes in their area. Interestingly, however, the goal of performing these searches is not necessarily to find a foreclosed home but to find an agent who specializes in this area of real estate. If you happen to find an agent on a listing for a home that you’re interested in as well then you’ve killed two birds with one stone.
3. Familiarize Yourself with the Prices of Homes in Your Area
Banks do not generally have a bottom line on price. Therefore the onus falls on the buyer to research the sale price of recently sold comparable homes in the area to do a comparison. This will allow a buyer to have a solid idea of what the market conditions are and make an offer that is based on those numbers.
4. Remember That Homes In Foreclosure Are Sold As Is
The previous owners of a home are not responsible for any repairs or maintenance needed on the property and neither is the bank. The buyer, in purchasing a foreclosed property, assumes all necessary repairs and should not expect to get a discounted price for any work that needs to be done. Many buyers will wrongly assume that just because a property is in foreclosure and is in need of some work that they should automatically be discounted for the materials and labor required to perform that work. But unfortunately for buyers it simply doesn’t work that way.
There is a lot to keep in mind when purchasing a foreclosed property and the process can be challenging, particularly for first-time home buyers. But if you follow a few key steps and do your due diligence, you can come out of the deal having gotten a great price on a great home.