Are you interested in purchasing a foreclosed home – a diamond in the rough at a price you can afford? You probably guessed right! It’s crucial to know what you’re looking for and how to shop for a foreclosed home. We’ll walk you through it step by step; we will take a closer look at what it means when a home forecloses, and how to get through the process of buying a foreclosure.
What is a foreclosure property?
A foreclosure is a home that has been seized and listed for sale by the bank that provided the original owner with a loan. When you see a home listed as foreclosed, it means the bank owns it. Every mortgage contract entails a lien on your home. If you fail to make your mortgage payments, your bank can seize control of your property through a lien. Foreclosures are usually the result of a financial disaster for the current homeowner that left them unable to keep paying for their mortgage.
Hence, you can already notice that buying a foreclosed home is a little different from buying a house owned by a homeowner.
Now let’s discover step by step the process of buying a foreclosure.
When purchasing a foreclosed property, it is critical to plan ahead of time. Although you can buy a foreclosure for less than market value, you must first make sure that you can afford it. Always keep in mind that if a property is out of your budget, no matter how good the deal might seem, you will end up struggling to make the monthly mortgage payments.
2. Do Your Research:
After you’ve determined your budget, the next step is to look for foreclosed homes for sale. Although a real estate agent will most likely be able to assist you in your search for foreclosures, you may want to conduct your own research as well. Some of the places you can look include:
- Real estate agents: Since they are the first to know when foreclosed homes hit the listing services, you can look for an agent that specializes in foreclosures.
- Newspapers: You may be able to find foreclosed properties advertised in newspapers. Yet, competition for these properties will likely be high.
- Mortgage lenders: You could choose to work directly with the lender. Still, competition for bank foreclosures can be very intense.
3. Hire A Real Estate Agent:
Most banks turn over foreclosed properties to a real estate-owned (REO) agent, who collaborates with standard real estate agents to find a buyer. Nevertheless, not every real estate agent has worked with REO agents. An experienced foreclosure agent can assist you in searching for foreclosures, navigating your area’s REO purchasing process, negotiating your price, ordering an inspection, and placing an offer.
4. Home Inspection
When you buy a foreclosure, you will be entirely responsible for the repairs. Therefore, a thorough home inspection is essential. If the inspection reveals any issues that you can’t afford to fix, it is advisable to walk away.
An inspection is a more in-depth look at your potential home. An expert will walk through the home and write down everything that needs to be replaced or repaired. Because foreclosures usually have more damage than homes for sale by the owner, it is a must to schedule an inspection before buying a foreclosed home.
If you cannot order a proper inspection, you should only consider buying these types of foreclosed properties if you’re advanced at-home repair.
5. Purchase Your New Home:
Read your inspection results and decide if the home in question is a great fit for you and whether you’re okay with buying a home as-is. Contact your mortgage lender to finalize your loan if you have the money or skills to make any needed renovations. Your real estate agent will assist you to submit your offer and prepare you for closing.