5 Steps to Successfully Buying a Foreclosure

Buying a foreclosed property can be a great investment, but please also know there are many pitfalls in the process, and the term “Buyer Beware” has never been more prevalent. 

Step 1 - Do Some Research

Start by doing research and searching available properties.  The internet is a wonderful place for you to research potential real estate from your couch.  Determine your search parameters, view the properties, you can select only foreclosed properties if you so choose, but I would advise you to view foreclosed, short sales and traditional listings to give you an idea of market values for all.  Start your search today by clicking here.

Step 2 – Choose a Good Realtor®

Locate a local Realtor® that has experience with Foreclosures.  There is nothing more valuable to a buyer than an experienced agent who has been down this road many times before.  They should be able to tell you what to expect in a normal foreclosure purchase transaction as well as help you plan for the unexpected(you would be surprised how often the unexpected rears its
head).  Many people may tell you it is better to wait to contact a real estate agent, but I think this step is invaluable.  A local agent will gladly guide you on a plan of action and set your expectations before you invest significant time and money.  Do you know what an “As Is” purchase really means?  Ask your new agent.  Once you find the right agent for you, engage
(hire) them to use their services, take advantage of their experience, and give yourself an advantage.   Buyer agents
will work for you!  If you call the number on the sign out driving around, that person is not representing you, they are representing the seller.

Step 3 - Find a Good Lender

Contact your lender for financing options.  If you don’t have a lender you trust, ask your real estate agent to give you some referrals.  This is a major factor in this process.  Foreclosed homes, due to the condition of the property, have limited financing options available.  If a home is in rough shape, many times FHA or VA financing may not be an option, and a buyer will need to plan to utilize a conventional financing product or cash.  Make sure your lender knows you are looking to buy a foreclosure and
that they are experienced with providing financing for distressed properties.

Step 4 - Start Looking at Properties.

Set your appointment with your agent to get out there are start looking, be flexible, many times foreclosed properties are priced to sell quickly.  If your agent calls you and asks you to go look today, he/she is not being pushy, they very likely have identified a “good deal” for you.  Be prepared that you may not be the winning offer on the first home you write on.  This is normal, but don’t let it discourage you.  Be confident that when you and your agent identify a home, that you determine a real “market value” and stick to it.  Many buyers in the market today get discouraged by not having their first or second offer accepted, that when they get to offer #3, they are ready to pay whatever it takes to get the home.  Bad decision…be patient…trust that you and your agents opinion of market value is accurate, and don’t overpay!

Step 4 - Get an Inspection. 

Foreclosed properties are distressed, meaning that the home has likely been neglected for some time and you will see the signs of neglect as you view them, but there may also be signs of neglect that are not visible to a typical buyer, so an inspection by a qualified professional is a must.  Just so you know, lenders allow inspections, but their contracts state “Inspections are for information purposes only” meaning that if you find something wrong, it is not opening negotiations.  Either you accept the issue, or you cancel the contract and move on. 

Step 5 - Close the deal! 

You can choose your own title company to close your purchase or you can use the same title company as the seller.  In foreclosures, many times the lender has designated their title company in advance, and a buyer is allowed to use the same title company.  Check the fees, many times if you use the same title company, the seller will pay for your owners title insurance policy, which could be hundreds of dollars.  If you are not comfortable with using the sellers company, pick your own or ask your agent or lender to give you some suggestions.

Zachary Adams | Realtor | CDPE | Wright Sherburne Realty | 612-845-7890