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PROS and cons of buying a foreclosure

 

THINKING ABOUT BUYING FORECLOSURE?

art.foreclosure.giIt’s no secret that foreclosure properties (AKA bank-owned, repos, real estate owned) are making up about 40% of all home sales lately.  It’s also obvious why – these are incredible deals.  Thinking about buying a bank-owned foreclosure? Here are some pros & cons to think about. Let me know if I can be helpful to you.  -Becky Wyatt

 

PROS:

Deals! – The bank is not an emotional seller trying to make a profit.  The bank wants to sell these houses fast and they instruct their real estate agents to price them below the appraised value at a liquidation price.  If the house hasn’t sold in a couple weeks, the agents typically are instructed to reduce the price until the offers start rolling in.  Foreclosures happen in all types of neighborhoods, so many are in fine condition.

Financing – If you haven’t gotten the memo that now is a great time to get a mortgage loan, call Carrie and get the scoop!  If you plan on get an FHA loan you can qualify for the best interest rates we’ve ever seen and only need to have a 3.5% downpayment.  You can buy a foreclosure property with a loan like this.  It’s only tricky if the property is in terrible condition, then the loan guidelines may prevent you.

 

CONS:

Move fast – The best deals have multiple offers within 24 hours of being on the market.  Most bank-owned homes are selling for full-price or over the asking price.  Sometimes my clients are the winning offer, and sometimes not.  If a bank-owned home hits the market and you want to see it I suggest you do not wait or it will be gone.

You only get one shot – The bank only wants your “highest and best” offer.  They won’t counter-offer back or communicate what is good/bad about your offer.  They are simply given a stack of offers and will reject it or accept it – so make sure your offer is a good one.  A professional Realtor will know how to type up a clear, solid offer that has your best interest at heart but also has the language that will make a bank take your offer seriously.

Cash is King – Need to finance your home purchase?  You will almost always be beat out by a cash offer.  Financing will take some time and banks want these houses gone quick to a “ready, willing and able” buyer.  I’m also noticing that the investors are back – making offers on these bank-owned properties without even seeing them in person!  But don’t worry – many are selling to normal buyers that need to get a mortgage.

AS-IS & repairs – Once your offer is accepted you’ll still get to have inspections and decide if you want to go through with the purchase (unlike auctions).  But whatever comes up as needed repairs will be your responsibility to fix.  The bank makes it crystal clear that they are selling this property AS IS and will not pay for any repairs.  They have already taken the condition of the property into account when the priced it and put it on the market.  A deal is a deal.  Recent example: My clients found out a custom home was built incorrectly and had many more hidden flaws than first thought – so they decided to cancel the contract during their inspection period and were refunded their earnest money.  Back to square one.

Ugly & Dirty – You will experience offensive sights and smells when looking at foreclosure properties.  I’ve seen everything from urine/feces to spraypaint/holes in the walls.  The previous owners have most likely taken the kitchen appliances and many light fixtures/ceiling fans.  Others (criminals) have taken kitchen cabinets, flooring, A/C units, baseboards and copper wiring. However, some foreclosures are perfectly fine – complete with fans and appliances.

Unsafe conditions? – If you are financing this purchase, your loan may require things like a working kitchen, no exposed wires, a pool with actual water in it, etc.  So if you plan on making an offer on a totally trashed property (and there are many) you may be out of luck at getting your loan.  Don’t get nervous – just insist on having an inspection during your inspection period and the inspector will advise you if there are any dilemmas.  Recent example: My clients had to arrange for a thermostat and ceiling fan hole covers to be installed before the appraiser would okay the property for the loan.

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1 Comments For This Post

  1. Foreclosure Says:

    Generally I do not post on blogs, but I would like to say that this post really forced me to do so! really nice post,and very informative.

3 Trackbacks For This Post

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Becky Becky Wyatt  
REALTOR®
HomeSmart Real Estate
480-383-9209 phone
888-855-4817 e-fax
www.ArizonaHomeTalk.com
Becky@BeckyWyattOnline.com
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