Foreclosure. It seems like half the country is in it and the other half is trying to make a killing on it.
The number of foreclosed homes staggers the imagination, and with more adjustable-rate loans about to reset, the end is nowhere in sight. The crisis, however, provides the opportunity to purchase a house that was all but impossible for many to afford in the boom years.
If you’re a potential foreclosure buyer, the obvious place to start is price and condition. But there’s far more to it. Consider these tips to get your best deal.
>> Consider “overpriced” properties
“The underpriced properties get a ton of activity and go quickly, but you can really get a better deal on an overpriced property,” says Sean O’Toole, founder and chief executive officer of ForeclosureRadar.com.
An overpriced property will generally get little interest and may sit on the market for a year or more. Therefore, when someone actually makes an offer, the bank may act on it quickly.
“For the homebuyer who’s up for the challenge, it can mean getting a property at less than market value,” says Aaron Lewis, broker/owner of The Lewis Team at Prudential California Realty in Turlock, Calif.
He offers this example: “If the home is listed at $170,000 and needs $10,000 worth of repairs, take a look at comparable properties in the area. If the house would be worth $200,000 with the repairs done, then you’re getting a $200,000 property for $180,000 and that’s a great deal.”
To move properties more quickly, says F.F. “Chappy” Adams, president of Illustrated Properties in Palm Beach Gardens, Fla., “lenders are often making significant repairs, replacing major items or offering repair assistance.” That alone may make the home, once repaired, a good investment down the road.
>> Line up the money
“Some lenders are favoring cash transactions over finance purchases and taking deeper discounts to sell the property,” says Adams, whose company has a department that handles only bank-owned properties.
If cash is not an option for you, it’s important to get prequalified for a loan so you can react quickly once you find a home.
>> If possible, time your offer
“Make your offer at the end of a month, quarter or year,” O’Toole says. “Many times, banks will want to get deals closed and off the books.
So, consider making a November or December offer and highlight the fact that you can close by Dec. 31,” he says. You can get a lower price simply because it works for the bank’s timing.
>> Visit the property
Many times listing agents — who often get 20 or more properties from the bank to list at one time — simply don’t have the time or manpower to include every detail about every house in their online marketing.
“[A real estate-owned] broker may run out to the house, take a look around the inside and snap a few photos of the outside, but they may not mention in the online listing that the home has a beautiful backyard and upgraded landscaping,” O’Toole says. It pays to do more than simply check out the property online. If the property meets your criteria for size, number of bedrooms and neighborhood, go see it in person. And, Adams says, “Always have a licensed home inspector check out the home.”
>> Deal with specialists
With REO properties, go directly to the listing agent, who has the relationship with the bank asset manager, who approves or denies the sale. Or, find a real estate professional who works extensively in the foreclosure arena who will have more experience in bank-owned properties.
