Home buyers who are looking for discounted properties this summer may consider a foreclosed property. The conventional wisdom being that banks and lenders will offer steep discounts to unload their property and great deals are to be had. However, foreclosures offer their own challenges and in their online article 5 Tips for Buying a Foreclosed Home, Fox News explains some of the differences you may need to consider if you are considering buying a foreclosure.
The “As-Is” Sale
Disgruntled homeowners in foreclosure can feel like they have nothing left to lose. Faced with the prospect of losing their house, homeowners sometimes leave the place stripped of anything valuable or useful, including door knobs, fixtures and wiring. In cases like this, the lender is unlikely to make repairs and will sell the home as-is. While you can get the place at a steep discount, it might only be a bargain if you’ve got some DIY skills. This shouldn’t necessarily discourage you from buying, but you’ll need to figure out if the cost of repairs will offset the discounted offer price. Also consider a mortgage that will allow you to borrow the cost of the repairs such as an FHA 203k loan.
Not Knowing What You’re Getting Into
With most homes, you’ll likely get some disclosure from the current owners. A helpful homeowner might give you a little advice, like the best place to start a garden, or offer you a heads up on minor repairs, like a bathroom door that sticks. And when it comes to big repairs, such as a shoddy foundation or termite damage, the owners might be legally required to let you know before you buy the place. But a lender has no history with the home, so don’t expect to get a run-down of problems before you move in. A foreclosure might be a good deal, but it can also turn into an unexpected adventure.
Don’t Assume They’ll Take Any Offer
While a foreclosed home can often be a bargain, you shouldn’t expect the lender to accept a lowball offer. Even in a market flooded with foreclosures, a bank might balk at a low offer, preferring to wait until housing prices bounce back rather than take a huge hit on the investment. However, you can use local foreclosures to your advantage. Take a look at recent sale prices for homes sold by lenders — which are often called real-estate owned, or REO sales — to help you price the place.
It Takes More Time
Most mortgages are backed by big banks and financial institutions, which means you will likely run smack into a large, slow-moving bureaucracy when trying to buy a home in foreclosure. With a traditional home sale, you can expect to find out if your offer has been accepted within a day or two. But when buying from a financial institution this process can take weeks. So have patience and don’t freak out if you don’t immediately hear back from the seller.
A Different Kind of Sale
Banks have their own processes and procedures for selling a home in foreclosure, which can make the purchasing process feel a bit foreign for experienced buyers. The bank might also have its own contract that protects it should the home turn into a money-pit. To make sure you don’t end up feeling shortchanged, hire a good building inspector and insist on tagging along so that you can find out as much as possible about the home.
If you’re searching for a home to purchase in Howard County or anywhere in Maryland, including foreclosures, search all homes listed for sale online at www.marylandproperties4sale.com .
For more information regarding special renovation financing such as FHA 203k loans, call 1st Mariner Bank at 877-733-4411.