What to Expect When Buying A Foreclosure
An economic downturn can result in a unique opportunity for homebuyers willing to take a calculated risk. The number of foreclosed homes available on the market can grow when financial struggles are common, but investors are often ready to capitalize.
However, shoppers looking for a place of their own can also take advantage if they know the challenges and are willing to put in the extra effort that can accompany the purchase of a home that’s been foreclosed on.
Foreclosures can be sold in several ways, including via auction. While this can increase the chances of a discounted deal, it may also require bidders to complete the purchase with full cash payment. This requirement can exclude traditional buyers who plan to utilize a mortgage.
While many foreclosed homes end up on the auction block and are scooped up by professional investors, it’s not the only path. Lender-owned properties can also be listed for sale with a real estate agent and sold similarly to more familiar real estate transactions.
Do Your Homework
Much like any home purchase, an excellent first step is a conversation with your lender. It will help to determine your options and define your budget for both purchasing the property and undertaking any necessary repairs or renovations.
With clear parameters in place, reviewing the inventory of FHA foreclosures listed at the HUD Homestore is a worthwhile place to begin your search. Partnering with a Realtor who specializes in foreclosures is required to make an offer on these properties, and can add to your chances of success. Due to the competition from investors, understanding the value of a foreclosure is integral to making a strong first offer. The bank’s interest in selling quickly often results in little room for negotiation, so resist the urge to undervalue the home hoping for a bargain.
Spot the Problems
The other difference to keep in mind when shopping for a foreclosed home is that in most cases, the property is being sold as-is. While it’s unlikely that the seller will make any repairs before closing, this is not a reason to skip the home inspection process. You’ll want to have a thorough understanding of the home’s condition and shortcomings before moving forward with the sale.
It’s also another reason your relationship with your lender is so important. There will be an array of financing options, ranging from a conventional program to 203(k) renovation loans, that you may want to consider before deciding the best way to proceed.
If you’re up for the challenge of finding a foreclosure that fits your family, let an Open Mortgage specialist explore all the financing options at your disposal. Our experienced origination specialists can make sure you’re in the best position to acquire one of these high-demand properties. Visit OpenMortgage.com or call us today for more information.