Three Things To Know About Buying A Foreclosure

Posted on: 27 May 2016

After touring home after home, you have found a house that you are ready to call your own. If your real estate agent informs you that it is a foreclosure, don't let the idea of buying a foreclosure intimidate you. Instead, arm yourself with knowledge so that you know what to expect during the buying process.

1. It can be difficult (but not impossible) to secure financing.

If you are paying cash for a foreclosure, this puts you in an attractive position to the bank that owns the home. When paying cash, you do not have to adhere to the regulations and rules associated with financing a foreclosure.

However, it is possible to buy a foreclosure by taking out a mortgage. Banks are stricter with foreclosures because many foreclosures require a large amount of repairs. These homes are often left uninhabited for a period and lack basic maintenance. The prior owner may have intentionally damaged the home or removed fixtures out of spite.

It can be helpful to apply for a mortgage that is specifically intended for buyers purchasing a foreclosure. A 203k loan is a popular option that allows homeowners to finance both the cost of the home and any required repairs. 203k loans adhere to the same financing limits as FHA mortgages.

2. Know that the home is being sold as is.

Foreclosures are sold "as is." This means that the bank who is selling the home is extremely unlikely to make any repairs or concessions.

Even though the home is being sold "as is," it is essential to to get a home inspection. The home inspection alerts you to the true condition of the home so that you can decide whether or not you can handle restoring the home to its former glory.

3. Come in with your best offer.

In some markets, foreclosures are sold for an amount greater than the asking price. The reason for this is that banks need to get rid of the home as soon as possible; they generally price foreclosures competitively. 

Your real estate agent can tell you if it is appropriate to place an offer that is over the asking price. In some situations, this is required to get the home. If you are buying in a hot market, present the bank with your best offer. You don't want to lose the home to another offer when you were willing to pay just a few thousand more. 

Purchasing a foreclosure can be a terrific way to buy a home with excellent potential at a fantastic price. If you are interested in buying a foreclosure, make sure to inform yourself about the associated procedures.