Foreclosures: To Buy or Not to Buy
You would have to have been living in a cave these past few months if you haven’t heard about the increase of bank foreclosures that have come on the market. There are also government and tax foreclosures, and they have increased as well. Some states, like California and Florida, seem flooded with them. The tri-state area has its share too. You can also buy a house in a “short sale,” which is when an owner cannot pay the mortgage and the lender accepts less than the total amount due on the mortgage from a buyer. If you go this route, you must seek the advice of both a real estate professional, banker and tax accountant, as short sales do have tax ramifications.There are foreclosure bargains on the market, but you have to be prepared with information and cash if you are serious about buying one. Don’t expect to get a house for free – banks want to make as much as they can, and even government foreclosures are not giveaways – although they can be cheaper than a bank owned home. That said you could find great deals especially if you are willing to put in a little TLC (foreclosures may have problems, starting with general neglect, depending on long they have been on the market). Here are a few points to consider as you start your search of foreclosure listings:
Finding Foreclosures
Before you buy a foreclosure, you have to find the right one. Government foreclosures, organized by state, can be found at hud.gov. These homes must be purchased and lived in or held for two years by the purchaser. Even the IRS holds property auctions for houses seized for tax reasons. Bank foreclosures can be found through banks, obviously – just go in and ask to see their listings – and real estate agents. You can also use paid listing services that specialize in foreclosures, but in this market I don’t think it’s necessary to do this unless. I recommend starting with real estate agents, bankers, and lenders, HUD and the IRS – all offer free listings.
The Process
Each state has its own set of foreclosure laws. So don’t go it alone – even if you find a government listing consult a lawyer before you make a bid. And make sure you have the money to pay for it. Most government foreclosures are sold on a cash basis. Bank foreclosures can be financed, but you need to be at the ready with pre-approval. Getting pre-approved for a mortgage also forces you to determine exactly how much you can spend on a property.
Check Out Several Homes
Look at several foreclosures to get a sense of condition and price. You will see a wild range of homes in various states of disrepair. Some foreclosures will be a great shape – many recently built homes have fallen into foreclosure or short sales. You may also see homes in drastic states or neglect, disrepair or even those that have fallen victim to vandals (including angry homeowners). So be prepared and keep an open mind.
Get an Inspection
The market is still sluggish so you do have time for this very important step: Hire a licensed home inspector to walk through the property to check the physical condition of the home’s foundation, roof, plumbing, electrical, appliances and structure. The inspector will provide you with a written report that details any issues and the cost to repair them. Factor those costs into your bid. And don’t bite off more than you can handle – make sure you have a contractor lined up to make repairs and renovations if you decide to go forward.
Know the Rules
If you decide to terminate the purchase agreement for any reason, you could lose your initial deposit or down payment – or both. So always read the fine print of any contract you sign, discuss them with your real estate agent and lawyer and understand exactly what your getting into.And good luck – buying a foreclosure could be your ticket to a beautiful home at a great price!
Please visit me at www.barbarasway.com for more tips and home advice.
