How to Buy a Foreclosure House
Foreclosure houses are quite good options for investing. These houses are actually seized by banks or lenders because the owner failed to pay the mortgage. You can buy them from banks that usually own them. After that, you can repair them (if necessary), and then you can use them to make a profit by selling them, renting them out, etc.
What Is Foreclosed Home?
Foreclosure is a process that is used when a house owner fails to pay the mortgage. When a house owner fails to pay the mortgage, at that time, lenders get the chance to seize the house, and this process is a foreclosure, and the home is foreclosed home.
It is quite similar to a car loan that is secured to the security, the vehicle; your mortgage is secured to your property. Now, if you fail to make payments, the lender has the right and gets the option to seize the collateral, in that case, your home. Foreclosure is quite a long legal process, and it can take few years in many states. On the other hand, in some states, it takes less than a few months.
Guide to Buy a Foreclosed Home
These steps will help you in buying a foreclosure house:
Step-1: Find a Real Estate Agent
You must hire an experienced real estate agent who knows more about processes like foreclosure and represent the interest of yours and will preserve the deal moving. An experienced agent knows more and will be able to provide you a perfect foreclosure home. Now, how to find the correct agent? Well, you can go to websites with a record of foreclosed houses in your wanted area. You should look for Realtors who have specialized real estate training in this area like the Short Sales and Foreclosure Resource (SFR) or the Certified Distressed Property Expert (CDPE) designations.
Step-2: Get a Preapproval Letter
So, you want the mortgage preapproval letter in hand; at the time, you are going to make an offer on a foreclosure unless you can afford to pay cash. It actually splits the lookers and the buyers. Now, a preapproval letter contains the detail that the amount of money you can borrow that depends on your lender’s valuation of the income and credit score of yours.
Step-3: Look at the Comps before Making an Offer
You must offer the most suitable price so that you can buy the foreclosure house. To find the right price, you must do a comparative market analysis. You can ask your agent for an analysis that will help you to understand the recent sale prices of comps or similar properties.
Step-4: Bid Higher Price (Only If Other Foreclosure Are Selling Quickly)
Now one actually knows what the bank’s end line would be. That’s why, if a foreclosed house in the area of yours is getting sold, it is important to with your agent to skill a strong offer. You also need to back up your preapproval letter. Now, foreclosure homes are already reduced, so a low offer might not work at all.
Step-5: Be Prepared to Buy a Foreclosed Home in “as-is” Condition
Foreclosure properties are usually sold, not in good Condition. That means the seller won’t guarantee the house’s Condition. It can have structural issues, lead paint, or termites. So, it is doubtful to make repairs. However, the foreclosure is owned by the bank, so no one is going to fix any of the present issues of the house.
I hope these steps would be enough for you to buy a foreclosure house. Just try to follow them correctly. Don’t rush! Talk to your agent, and then take further steps. Find foreclosure houses by considering these tips too.