Nowadays there is a foreclosure in probably every neighborhood, if not one then two, three, etc. Some can see this as an opportunity, to be able to purchase a home that they probably couldn’t of been able to afford had it not been a foreclosure. BUT is buying a foreclosure for you? Do you know what it takes to buy a foreclosure? If you choose to buy a foreclosure you need to go in with your eyes wide open. Although you may be purchasing a property for $15,000 less than market value but the home may need upto $30,000 in repairs. Can you afford to make those repairs needed?
If you are thinking about buying a foreclosure, here are some things to think about before putting an offer on the table:
- Does the property qualify? If there are repairs that make the home inhabitable, most lenders will not accept property and the only way to purchase would be cash.
- Does the property need too much work to make financial sense of it? Just because the price is low doesn’t mean it’s a good deal.
- Are you planning to fix & flip? You might want to rethink this, you would want to get estimate for repairs, get some comparable values of what the home could sell for with the needed repairs, after all said and done, will you make much profit after all repairs are done.
- Never expect that you are automatically getting a screaming deal. Some banks will slash the home price for a quick sale but others may not offer much of a discount which both could scenarios can create bidding wars!
- Make sure to pay for a thorough inspection, this may cost some upfront (approx $300-500) but this could prevent future costs in extensive repairs or improvements.
- Get bids for repairs and improvements before you make an offer!
- Research the homeowners association if applicable. If there are many homes in foreclosure in the neighborhood this could raise costs of your homeowners assoc dues to cover the costs. And this could also cause problems if many are overdue in their fees, many lenders will not approve a loan if too many homes are in default.
- Make sure to have a FAT emergency fund. At least 6 months worth, this is for unexpected repairs or if planned on selling and unable to sell.
- Be patient! Sometimes the buying process can take longer.
Now this is a lot of information and you may have questions are need some clarification. Please don’t hesitate to call or email me, I am here to help. My goal is to make buying a home in this market not be so intimidating, and less stressful.
To read complete article from MSN Money click here.
Happy House Hunting,
Ray Williams
Branch Manager
Summit Home Mortgage
303-779-0591 ext. 101
