In each new issue of Real Estate Bargains and Deals, we bring you great real estate deals and bargains, most of which are located in warm weather U.S. states. Some are investment opportunities or rentals. Others just need a little TLC to become a comfortable retirement dwelling, a second home or a vacation residence.
Risks and Benefits of Buying a Foreclosed Residential Property
The housing bubble has popped and rebounded. There may not be as many foreclosed properties on the market as you might expect. Buying one can still be a good deal - up to five percent less than a similar house in an identical neighborhood. If you want such a deal, you'll need to budget well, do your homework, seek the help of real estate professionals, and stay patient.
Distressed properties can go through three stages of foreclosure. The pre-foreclosure property may be difficult to find. Owners and banks aren't quite ready to accept defeat or publicize the failure. The waters are rising, but there's a chance things will work out.
Some property owners, however, may want to salvage their credit ratings before the worst happens. They could be motivated to accept an offer quickly. If the property is a short sale, closing may take up to 90 days. This gives you time for due diligence, title research, and standard inspections. The biggest hurdle is the bank. If your purchase price doesn't cover closing costs and the mortgage, the bank may not approve. You may also have to prod the old owner to vacate.
If you're looking for a good investment, a foreclosed property may be an interesting gamble. If you're looking for a new home, this may not be your best option. Here, the bank has taken back ownership. They do not want to keep these troubling houses on the books and sell them "as is" at auctions.
Your competition will be professionals with lots of ready cash. Another bank may also bid against you. If you don't have cash, financing can be tricky. Be prepared for non-standard loans. There are no mortgages, no closing credits, nothing that resembles an ordinary real estate deal. You won't have the chance to inspect the property or research the title. You may end up with liens on a less than desirable home in a neighborhood that is not in great shape.
A post-foreclosure or REO property is usually listed on MLS. The bank owns it and has taken the time to invest in it. They've made the listings look nice and may not negotiate much on the purchase price. They will consider helping with down payment, closing costs, and the length of the escrow.
REOs should also have a clean title. Buyers may not have to worry about back taxes or liens. Inspections within the contingency period are allowed with one caveat. If you find something, don't expect the bank to fix it. These are "as is" sales. Think extra paperwork, too.
Should you remain interested in buying a house in foreclosure, then you need to ask yourself some serious questions. Are you buckled in and ready for the ride? How are your finances? If you're buying at an auction, do you have the cash to lose? Do you have a real estate agent or lawyer as your ally? If the sale falls through, do you still have a place you can call home?
Buying a foreclosure is not for everyone, but for some people it makes sense. Maybe you are one of those people!
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