Buying foreclosed homes is a hot topic due to the number of foreclosures on the market and the corresponding fall in real estate prices. However, buying a foreclosed home is not the same as buying other real estate for a number of reasons. Investors and home shoppers need to take some additional steps to find the best deal.
One the most important steps to buying foreclosed homes is to have the best credit score possible. Those with the highest score will get the best loan terms which will help to save money over the life of the mortgage. Buyers should pull their credit report and review it carefully for mistakes. Any inaccuracies should be corrected as quickly as possible. Buyers should be certain to pay all bills on time and take other steps to improve their credit score while shopping for foreclosures.
Find an Agent
A real estate agent with experience in foreclosures can be a helpful asset. Buying foreclosures can mean wading through a lot of administrative rules and complying with various laws and regulations. An agent with experience can help the buyer to get through the process quickly and efficiently.
Though a foreclosed home may be selling at a substantial discount to its value just a few years ago, buyers need to consider the home’s current value and where it may go in the future. Some markets may rebound to previous prices quickly, but some may not. Investors looking for rental properties will need to consider the rental income the house will currently provide as well.
Foreclosures may or may not be in livable condition. Financially struggling homeowners may have taken shortcuts on repairs and maintenance. Homes that have set empty for months may have significant damage, especially in areas with cold winters. Having a trusted home inspector to thoroughly go over the property is important to prevent paying too much for a home that will need a lot of work.
Many homes, whether a foreclosure or not, will require significant repairs. Buyers should carefully determine costs for these repairs and have the money set aside to complete them. This is especially true for roof, siding, foundation, and other issues that when not promptly repaired will cause further damage.
Shop the Neighborhood
A number of foreclosed homes in a neighborhood will depress the value of nearby homes. These homes that are offered for sale may be comparably priced, but in better condition. The homeowners may also be easier to work with than the banks which can make the buying process go more smoothly.