Here are some of the things you need to know before buying foreclosure. This is the straight-up truth on how to buy a foreclosure! If you want to be successful, you have to take it slowly but surely. You have to prepare yourself but knowing how real estate investing works and know the facts, methods, and strategies that can aid you to success.
HERE ARE THE 5 MOST SIGNIFICANT AND ESSENTIAL THINGS YOU NEED TO KNOW. ALL FORECLOSURES ARE NOT THE SAME! There are many different ways to purchase foreclosures along with the diverse types that are obtainable. Buying property at a foreclosure sale at your courthouse is as dissimilar as buying from the seller directly. Buying a foreclosure at a your local tax auction is NOT the same as using a experienced realtor to deal for a foreclosure that’s listed with a real estate office. Information for these various kinds of foreclosure deals differ greatly. Besides, just because you get a foreclosure at a cheap price doesn’t necessarily mean you are going to make a tremendous return on your money. You have to decide what class of foreclosure you are going to acquire. Every kind of foreclosure has a different method about how to possess that property. Also,your time frame, procedures on negotiating and your research method vary for each different type of foreclosure. The simplest and best way to buy a foreclosure is when it has been listed with a real estate agent. To put it altogether, what this means the foreclosure process is already been completed for you. Any title troubles have been corrected, and the property is ready to buy without any accountability. The finest part about all this is you have a minimal amount of research to do. If you are looking for foreclosures in the newspaper, be cautious about whom you are talking with. A proficient real estate company under law must provide their office name in the ad. You should be skeptical about no office name or representation. This could be an investor that has already purchased a foreclosure and is passing it on it to you. There is nothing wrong with this at all, except YOU won’t be getting that fantastic inexpensive price because he’s just added 15k-30k onto his asking price, and that’s no deal for you! PURCHASE IT FROM A REALTOR who works at an office that concentrates and does foreclosures. Most foreclosures, even local bank owned properties (REOs), as well as Fannie Mae and Freddie Mac, list their properties with real estate offices. Even if you talk with the sellers thinking they might sell to you directly for a great price, they will refer you to the listing office. They compelled to pay the real estate company when it is listed with them. Save yourself time and aggravation, and discover an office in your area that sells regularly foreclosures. They have the expertise and experience you will want to help you get the one you want. Recommendation: ** Don’t use ANY realtor, qualify them the same way they will qualify you as a purchaser. If they haven’t done more than 10 foreclosures, don’t use them. Their inexperience can cost you the property you wanted. You need to work with an well-seasoned real estate foreclosure specialist. This will give you an advantage over your competitors.
CASH WILL NOT GET YOU A BETTER DEAL! One of the greatest fallacies about buying foreclosures is that cash will guarantee that you get the property instead of someone else, or that it will get you the property for .50 cents on the dollar. Does offering cash make your offer stronger? Absolutely! Does it mean that you just won? Not at all. These properties are usually listed below fair market value, investors flock to them, track them, make multiple offers on them in the hopes one will go through. If you are an investor, your competition is other investors. They are making cash offers too! As an investor, the cash won’t bring you clout a good reasonable price and a QUICK closing will. If you are a homeowner looking for a good deal, don’t think you can’t get a foreclosure without paying cash. The majority of them are actually financed, so your offer doesn’t get put on the bottom of the pile because you want or need to get a mortgage. What’s your advantage over the investor that is making an offer on the one you want? YOU will be using it as a primary residence vs. investment. Sellers of foreclosed properties prefer to sell to someone that will live in the home. Statistically, primary homeowners protect their investment better than absentee landlords and renters. So what will get you a better deal? FACT: a good reasonable offer, starting about 10% below asking price, the ability to close quickly (2-4 weeks), agree to buy it AS IS after a quick home inspection. Tip: Your home inspection is for your information purposes only. That inspection so that you know what needs to be repaired if anything after you close, do not use it as a negotiating tool after you and the seller have agreed on price.
NOT EVERY SELLER IS SAME AND EVERY SITUATION IS DIFFERENT! Just as you purchase each property in a different way, for a different reason, and sell in a diverse way for a another reason, so to does the seller of a foreclosure. The only thing that remains a the same is that the foreclosing bank takes back possession of a property and then hires a real estate office to advertise it for them. Several times the bank will hire an Asset Management company to process all of their foreclosures; They in turn hire a real estate office to market them. The likeness stop there. For simplicity sake the term “Seller” will include all local banks,government backers such as VA, FRMC, HUD and FNMA, and asset management companies. There are thousands of sellers out there that have their own policies on how to market their foreclosures. Their policies include , how to close on them, how to negotiate,some even require the purchaser use the sellers attorney. Some sellers agree to repairs, some don’t, , some will negotiate that fine and some charge a daily fine if you don’t or can’t close on time specified in the contract, some don’t charge. A number of sellers won’t even look at offers until the property has been listed with a real estate office for a minimum of 14 days. Serendity and fortitude play a essential role in negotiating for the property. If you want to get the property you must follow the seller’s policies and requests. The mass of the paperwork or procedures probably won’t even make sense to you. Just like any other business, policies and procedures are there for a purpose. You will sign, what may seem like a mountain of paperwork, be asked to come in and sign another 2 weeks later, and another 1 week later. DON’T GET FRUSTRATED. Getting irritated and angered won’t make you money. A proposal is to just think about the things you will do with this property once it closes and the monetary gain you will receive. The seller may answer your offer in 3 days, it may be 3 weeks. One aspect of our society is we live in a world of instant gratification. You need detach yourself from the outcome in a way (easier said than done for most people) and say to yourself it is going to happen and it is on its way. In addition to you being extremely patient will get you the property because several other purchasers will get angry and frustrated and drop out of the game. Don’t force the seller to reply to your offer in one day. Don’t walk away from your bid because the seller after 10 days still hasn’t responded. You will miss out, and someone else will get that great deal because they were willing to be more patient and follow the rules. Negotiating, price reductions and price setting are also very different according to the policies of each of the sellers AND ALSO THE PROPERTY! Some start at fair market, some below, some way belowSome negotiate better than others, some will reduce prices by 20k, others only in 3k increments. Some sellers list it and let it sit (those ones usually sit for a long time too!). Your realtor can’t tell you which seller is likely to take a lot less because each property is being sold under diverse conditions or who negotiates better than others. There are thousands of different sellers and multiply that by the hundred thousand foreclosures nationwide. It’s an impossibility to figure out which one of those sellers are going to sell at 50% of list price.
FORECLOSURES ARE NOT SOLD FOR WHAT THE PAYOFF WAS ON THE OLD MORTGAGE. What happens here is that the bank gets a fresh, new appraisal. The bank wants to know what the fair market value is of the property based on its current condition. A house sits in a $170,000 neighborhood. The owner purchased 12 months ago and put $50,000 down when he bought it. His bank forecloses for $120,000. The house is in mint condition in a hot area where property is selling in about 30 days because of the demand. The house gets listed with a real estate office for $162,000. You find out the old mortgage was only $120,000 so you offer $130,000, figuring in the real estate fee and a few extra thousand for the seller. DO NOT START OFF YOUR REAL ESTATE INVESTING CAREER THINKING THIS WAY! The odds are very much against you acquiring the property are very slim. If the house is not worth more than $130,000 to you, then offer $130,000. If the house is worth every penny of $162,000 then offer in the low-mid 160′s if you want a chance of getting it! One important you need to realize. Banks are in the business to make money, and it is okay for them to make moneythe same as it’s okay for you to save large amounts on a purchase. If you apply the method of offering in the first scenario to this case, based on the balance of the first mortgage you would offer 152,500 plus realtor fee, plus a little extra for the seller. The seller would be satified to accept an offer of $162,000!!!! I think you see what we mean here! The point is this: The balance of the mortgage that was foreclosed on really is irrelevant when it comes to purchasing of the property. Tip: The value of real estate is set by you, the consumer. It is not determined by the seller, your realtor, your next door neighborWhat matters is what its worth to YOU and that price will be different for each of you. One investor may be willing to pay $50k for a property, another $85k for the same house. So what is the real value? Is it worth $85, or is it only worth $50k? Here’s the answer: It’s worth $50 to the one investor, and it’s worth $85k to the other.
You have to be emotionally and financially prepared to buy! Let me say that again, you must be emotionally and financially prepared to buy! If you know you will be financing your foreclosure, then go get prequalified and build that relationship with your lender. Don’t bother driving around looking for them, hanging out at the auction or researching the one down the street. Sellers especially bank owned sellers will not respond to any offer that does not come with a pre-qualification letter from a bank or mortgage broker! Don’t set yourself for more stress and aggravation by doing it out of sequence. First, go get a pre-approval right away, then start searching for that property. Most pre-approval letters are generally valid for 90 days. **Very essential tip: Before you apply, let your lender know that you will be buying a foreclosure. The principle of this is if the property requires any work, even if it is very minor work such as a door being replaced, most sellers will not allow the work to be done before closing. This can cause a challenge if the lender won’t release funds until the repairs are made. This can not and will not be negotiable on the seller’s side, so make sure your bankis aware that you purchase AS IS, and repairs will take place after closing. If they tell you they can’t, say thank you for your time, and go pursue another lender that will. There are several lenders out there that will! You want to avoid getting a “false” pre-approval because the lender doesn’t have all the information they need to give you a loan. If you are a cash purchaser, you need to include with your offer a letter from your bank or brokerage firm stating you have cash funds available for the purchase. This is standard practice and applies to ALL cash investors so don’t be offended. The seller doesn’t want to know how much is in your account, just that you have your money available to purchase. As a investor, you should bring your checkbook when you go to look at the foreclosure with your realtor. This is part of being prepared. If the house is what you want, and the numbers work for you as an investor, make an offer right then and give an earnest money deposit. Believe it or not, property is lost overnight! I have seen this happen way several times. You might be going through the property on Monday at 10am. The 2 other people that looked at it over the weekend might be sitting in an office signing offers or they might not. Either way, you want the advantage without any competition. Being swift and fast is the name of the game when it comes to winning those deals like foreclosures. If your realtor came prepared with all the paperwork needed to offer and you are organized and ready, you can get it signed, presented and maybe accepted while those other 2 people are still “contemplating about it”, or hysterically rushing around trying to get a pre-approval letter in one day. BE PREPARED AND READY TO GO!
If you would like more knowledge about this theme or need some help when it comes to foreclosures. In addition to that, if you would like a list on some of the hottest foreclosures in the Myrtle Beach area, click here. Free Myrtle Beach Foreclosure List