Purchasing Foreclosure Property - Things to Keep in Mind
A foreclosed property is one that is usually with a bank or a moneylender. Their owners are not able to pay off the loan or mortgage against it and thus they are sold by the holder of its paper to recover back the loan amount. These properties are normally sold by the mortgage holder or any third-party lien as an open auction. Before it, a value is being assigned to it by an authorized valuer and a reserve price set after consulting a creditor.
These properties are normally considered a bargain buy as you can get them at about thirty to forty percent less than their market value. However, they differ vastly from a normal buy. Thus, when buying them; you need to bear certain things in mind.
• Partner with the right estate agent
It is always smarter to look into any foreclosed property with the right estate agent by your side. Most banks and third-party liens often hire a real estate agent to handle their property under the tag of REO properties or ‘real-estate owned’ properties. There are specialized agents who expertise in foreclosure properties and thus all complications can be avoided or addressed in the right manner.
• Find a suitable property
Next step is to look for a property that best meets your needs. You can find about foreclosure sales through property websites; notices in print media and various other sources. Even your real estate agent would have a listing of foreclosed properties. When you find a suitable property; it is crucial that you look into its various factors like public records and lien on the property as it can lower the prices.
• Assess the market value of the property
Before you even bid for the property; it is important that you get the market value of the property. Based on it and the lien on it; you need to decide on the figure that you are willing to spend on it. The real estate agent can play a key role in helping you arrive at the correct figure here as he would have visited a number of auctions and would have his finger on the pulse of the market. Another precaution that you need to bear is to stick to that figure and not get blown away with the heat of the moment during the auction. It’s very easy to bid a higher amount as the sense of competitiveness creeps in.
• Never buy the property without a showcase
It is always important that you demand a site visit and inspect the property closely along with your real estate agent. It is important to take the agent along as his trained eyes can check and locate details that might skip your novice eyes. Getting first-hand experience of the house would also help the agent to negotiate better and get the best deal for you.
• Estimate your repair costs
The major purpose of inspecting the foreclosed property is to examine and estimate the repair costs. You need to look closely into its plumbing line, electricity circuit, door, windows, etc. Their state would dictate how much you would need to invest in the house to make it habitable. You must never commit to the house before the inspection. In case the house requires repair whose cost is extremely high; you would have the option to take back your bid or lower the amount. You will not be able to back down if you commit to the house before inspecting it.
• Carefully scrutinize the bank owned addendum
Most banks and third-party liens add a home addendum to the purchase and sale agreement of the REO properties. It is a contract as well as a legal contract that is applicable to all agreements with foreclosure properties. It is usually non-negotiable and a fixed amount. It must be read carefully and must be agreeable to you.
Conclusion
There are various other aspects to look into like hidden foreclosures. Post it, it is your real estate agent who would do the final closure negotiations and get a fair deal for you. The closing negotiations are extremely critical and test your real estate skills to the maximum. Once everything has been ironed out, the process of drafting the papers, getting the requisite amount from a moneylender and all other process start and you get the property papers. The entire thing can take up to a month or two months but can be faster with the right agent.