With the increase in foreclosures, this is a good time to buy, but first determine what you are going to look for. You should ask yourself if you are going to convert the property into a rental unit, if you are going to live in it with your family, or if you plan to renovate and sell it. ”
When determining the response, consider whether you want to buy at your location or if you are willing to move further to get a better price, and determine your level of risk. Houses that are owned by banks have fewer risks than auction properties, which usually can not be inspected before purchase. “The auctions are for people with a high tolerance for risk and willing to examine the details. I do not recommend them for those who buy at auction for the first time”.
Among the foreclosure options are houses recovered by banks (REO), houses in the pre-foreclosure stage or with non-payment, short sales and auctions. An REO is a house, or property, that is not sold at a foreclosure auction and, as a result, becomes the property of the bank or the mortgage company. Foreclosure is easier and safer. It is the closest thing to a traditional purchase of a home, and a traditional mortgage, and gives room for negotiation. “The REOs are the best opportunity at the moment: there is a huge inventory.”
When considering an REO, verify that you are paying a fair price. Investigate market prices, the value of the house and the neighborhood where it is located, advises John Anderson, real estate broker and member of the National Association of Realtors. Anderson says that just because a property is in foreclosure does not mean that the buyer will make a good business. “The buyer must have his eyes wide open.” He recommends doing an inspection of the house, checking that the equipment works, that the pipes have not been removed, and that the pool is in good condition. If the house requires some work, determine if it is worth buying it even if you have to pay $ 60,000 more in the repair.
A property in the pre-foreclosure or default phase is when a loan institution files a notice in the courts saying it is going to initiate foreclosure proceedings on a property. The owner receives a notice of default, but the loan institution can not claim the property or sell it. Those interested in buying it can examine documents filed in court about non-compliant homes and try to negotiate a price with the owner. Let me explains how this process works: let’s say a house is worth $ 500,000 and the owner has a capital gain of $ 100,000. You buy the house for $ 450,000. The owner does not have to undergo foreclosure, and you acquire the home for a price 10 percent below the market value. A place where you can see information about properties that will be sold soon in foreclosure sales is the website of the Clerk of the Court, www.miami-dadeclerk.com/MortgageForeclosures.
With a short sale, the bank accepts less than what is owed on the mortgage or the total price of the house. Anderson says that in this type of business you have to be patient after an offer is made. “It may take between six and eight weeks before receiving a response from the bank.” Another drawback is that you have to negotiate with the owner and with the bank.
Auctions require even more research and more caution, especially since it is difficult to inspect the property. “Find out what the house is worth before making an offer,”. “There is no turning back if one buys a house in poor condition.”
In any foreclosure, check for unpaid water bills or a lien against the property before closing the transaction, and get a preliminary approval of the loan before you start looking. When you are ready to begin the search, review the listings of properties for sale with real estate agents, banks, local newspapers and county websites.
“Buying a house in foreclosure is a long process that requires many calculations. It will take time and you will have to see many properties before finding the one that suits you, ”