5 Important Steps in Buying Foreclosures

1. Your first step is to get pre-approved from your Lender. All REO (real estate owned) bank sellers won’t negotiate your offer unless they see a “pre-approval” or commitment letter from your lender first. This first step is critical to your success and additionally to your knowledge of what you can afford.

2. All bank owned Foreclosures are sold As Is . So if you have a home to sell first as a contingency, well, then you’re wasting your time. Your pre-approval letter from the bank will state what you can afford in addition to your current liabilities, such as your current mortgage. Home Inspections are strongly advised, and even welcomed by the bank, during the accepted contract period but don’t expect the bank to fix anything (because 99% of the time they will not).

3. Check the condition and quality of the house thoroughly before you enter in any negotiations. Most “non-productive”, with deferred-maintenance, foreclosed houses can be available at much lower prices than those in good condition. Expect the Home Inspection to only point out things you didn’t already know from your own unofficial inspection.

4. Hire a Realtor with extensive knowledge and sales history with bank foreclosures . Know your legal rights to prevent future conflicts (there can be many). Many Realtors are clueless in all the legal Amendments, stipulations and contracts written by the bank’s legal team (not a standard Purchase and Sales Agreement they’re used to).

5. After Inspecting the house, estimate your total costs for fixing or updating carefully. Warning: Not all Foreclosures are bargains!! Only buy bargains, naturally. Some foreclosures can be a financial nightmare especially if the costs of repairs are much higher than initially thought or estimated.Know your Home values very well in the neighborhood or subdivision your buying in (forget about going back 1 year in today’s housing bubble burst). Make it your goal to save a minimum of 10% off of very similar resale Homes.

By: Ken Beal