How To Buy A Foreclosed Home
What You Need to Know for a Foreclosure Real Estate Auction
Foreclosures are a great way to purchase a home and land for cheap! Often you can get great properties for a fraction of the cost you would pay in a traditional real estate sale. Foreclosure auctions are fast and easy, since you know exactly what you plan to pay and when you can expect to close on the property (auctions do have end times while typical real estate sales do not). There is a bit of a different process to purchasing a house in a foreclosure auction compared to a traditional real estate sale, so read on to be fully informed before you place a bid.
What are Foreclosures?
A home is foreclosed upon when the owner stops making their mortgage payment. In order to receive a loan for a large purchase, you are required to have some form of collateral to back it. This is typically whatever you are using the loan to pay off, in this case, a house. If you fail to make payments on your loan, the bank or other lender will take possession of the home in order to recover their losses. Often, the bank does not have time to wait to hold a traditional real estate sale, so they will sell through us to liquidate the property to quickly. We auction off many traditional and commercial real estate properties for banks and other lending associations.
Find an Agent
One of the first things that you will want to do when looking to purchase a
foreclosed home is to find a quality real estate agent that is familiar with foreclosures. Their experience will be necessary in your search process and they will able to help you discover exactly what sort of foreclosure you are looking for. They know what to look for in a foreclosed property that will make it a great investment and will do all they can to get you the best price possible. If you are planning on purchasing a home through a foreclosure real estate auction, it isn’t necessary for you to have an agent, as you won’t have to be negotiating anything. However, if you’ve been on the hunt for the perfect foreclosed property you probably already have an agent – so it won’t hurt to bring them along to see the property you are planning on bidding on!
Understand As-Is/Sale Subject to Approval
One of the major differences between a foreclosure sale and a foreclosure auction is that the buyer has a lot less negotiating power. Foreclosures are typically sold As-Is, meaning that what you see is what you get. Because the bank is the seller, they will not perform any upgrades or fix minor repairs in order to compromise with you on a selling price. Additionally, anything left on the property (such as old furniture) will belong to you as well and it will be up to you to choose how you wish to deal with it.
Foreclosures also typically have a ‘Sale Subject to Approval’ term to them. Because the bank needs to recover as much of their loss as possible, often times they must approve the amount that has been offered to make sure it will be enough for them.
Inspect the Property
After you have gone through all of the information and photos that are available online of the property that is up for auction (or for sale depending on the process you are going through), check for inspection dates and times that will allow you to take a better look at the property you are planning on purchasing. Once you are at the property, do a complete walk through of the property top to bottom. You will want to note any damages that need to be fixed in addition to surveying the condition of the rest of the house. Make sure that the house suits the purpose you are intending it for, and step back and look at it objectively as a real estate investment.
Know Your Finances
Here’s the big one – sit down and figure out what you are able to pay. Buying
a house is a huge ordeal, and it should not be taken lightly. First things first, visit your own bank and get preapproval for a loan if you aren’t planning on paying for a property outright. This will expedite the sale process on your end and will help you decide how much you can pay for the property. Next, consider what you are willing to pay, not just what the bank says you can afford to pay. It’s important to figure out your maximum bid so that you do spend outside of your means. Afterall, you don’t want to have to foreclose yourself! Take into consideration any of the expenses you will incur to repair damages that currently exist. Last but certainly not least, make sure that you know all property taxes and any other yearly expenses you might have to pay if you purchase a foreclosed property. While you may be able to afford the property when it is foreclosed, do you have the funds to keep up with it all the time? You will be able to find all relevant tax information listed on our auction site for each property.