We’ve already discussed financing your foreclosed home; however, cash buyers will always have the upper advantage, with the exception of HUD and Fannie Mae/Freddie Mac foreclosed homes.
With HUD, Fannie Mae & Freddie Mac, owners who will occupy the property get first dibs. That means no other non-occupying buyers – aka investors – can bid on the property for a certain period of time, to give government agencies, non-profits, and homeowners an opportunity to grab it first.
Buying a foreclosure requires careful budgeting, the right real estate team, and the mental resolve to see the purchase through.
The condition of most of the properties is what throws a few of my buyers off. They are dirty. Some suffer from water/mold damage, roofing damage, electrical issues, plumbing issues, and more.
Now, more than ever, you need to determine what type of repairs you absolutely, positively will not do.
Other properties will surprise you. They’ll be right out of the early 1990s but will otherwise be in decent condition.
When buying a home in foreclosure you might become responsible for any debt connected to the home; i.e. unpaid taxes, construction loans, home equity lines of credit; etc. I would not purchase one without an attorney so that you can fully understand what risks you are assuming.
Current tenants? If they refuse to vacate the property, plan to dish out extra money for eviction costs. If the tenant happens to be the former owner, I feel sorry for you. I can’t tell you how many disgruntled owners have damaged the property when they were forced to leave.
I don’t want to discourage you from purchasing, I just want you to be aware and plan accordingly.
In the best scenario buying a foreclosure will help you invest in an area you would otherwise not be able to afford, and to walk into an investment that is below market rate. That’s always a plus. I purchased homes for less than $40,000; put about $20-$35,000 in repairs and am sitting on $50,000+ worth of equity.
That’s always a plus 🙂
When purchasing a foreclosure, it’s all about the money. Your lender will be working with a bank’s representative, not the former or current owner of the home. Come with a strong offer the first time. If the numbers make sense they’ll accept your offer (even if it’s below asking price); if they don’t, you’ll be rejected.
There are multiple stages of the foreclosure process, you can get a better deal depending on which stage the foreclosure is in, but keep in mind you’ll be taking on more risks as well.
Let’s go over that next.