Buying a Foreclosure
Opportunityis rarely with out risk. Buying a foreclosure is a perfect example of how knowing all the risk factors can save you time and make you money. There are three primary ways you can buy foreclosures: pre-foreclosures where you buy directly from the home owner before the bank forecloses, at auction where you place a bid on the courthouse steps and from a REO (Real Estate Owned) company post foreclosure. This article will only focus on buying directly from the bank after the foreclosure. A tide of foreclosed properties has been sweeping into the beleaguered housing market. In some areas, foreclosed homes now make up as many as 40 percent of all active listings available for sell. This spells opportunity for the cautious home buyer. Many buyers see a once in a lifetime opportunity in the gloomy headlines. David Ramsey, the nationally known money expert says there has never been a better time to buy real estate inAmerica’s history.
The key to success with a REO property is selecting a real estate agent who has extensive experience handling purchase transactions involving REO properties. A typical REO property will be listed at 80% of the average value of the similar homes in the neighborhood. Remember the banks focus is on lending money and not owning homes. They want to sell these homes quickly and at a discount to gain more cash to lend. Almost all bank owned properties are sold “as is”. This means the seller will make no repairs and will not warrant the property or the title to the home in any situation. The seller of these properties will either be Fannie Mae or Freddie Mac (two quasi-government agencies involved in the secondary mortgage market), government agencies such as FHA or VA and finally individual banks across the country. Each organization has their own unique sales process, but I will outline the general terms of the sell.
Most foreclosed homes allow the buyer to submit an offer on with terms in the sales contract very favorable to the buyer. However, beware because these companies will require you to sign their addendum. A REO company addendum is actually a superseding sales contract. Most addendums specifically state that the terms of the addendum supersede the terms of your offer. The addendums are highly favorable to the selling banks and should be read carefully. The typical terms are sold as is, closing date and place to be selected by the seller, $1,000 certified funds required for earnest money, earnest money may not be refundable, contract extensions may cost up to $25 dollars a day, no repairs will be made at the sellers expense, buyer may make no repairs prior to closing, and finally buyer must turn the power and water on at their expense prior to closing if they want and inspection or appraisal conducted.
Buying a foreclosure is often touted as a way for both owner-occupants and investors to get a great deal on a property. However, the potential financial rewards of buying a foreclosure don’t come without their share of hard work and headaches. For even more information on buying a foreclosure, please download Scott’s “Foreclosure Buyer’s Guide”
This information was provided by Scott Hines, a REO buyer specialist. Scott is a broker at The Deselms Team, a recognized expert on buying foreclosed homes & REO properties. Scott may be contacted for any questions at (615) 268-2881 or at www.PremierBuyersAgent.com . Scott was a top selling buyer’s agent in Tennessee in 2010 and has assisted many past clients navigate the bank “red tape” to successfully purchase bank owned homes at below market values.