How To Buy Repossessed Homes
Need to know how to buy repossessed homes? Buying these homes can be a little more intimidating than buying a regular home. There is more paperwork to read and understand. It is important to educate yourself before you buy and also to surround yourself with knowledgeable people. There are many things you need to do before you actually buy a repossessed home.
- Find a lender before you find the home. Ask lenders about the mortgage loans they offer. Find out how much money is needed for a down payment. Ask to be pre-approved for a loan. The bank will approve you for a loan contingent on the home you buy. Most banks do not charge for this, but may ask to hold on to a check for the amount of a future appraisal. The money is normally returned to you if you do not find a home. Many foreclosure companies will require a pre-approval before they will look at an offer. This also gives you an idea of how much you can afford and reduces the chance of an embarrassing denial before a closing.
- Find a real estate agent experienced with repossessed homes. There will be extra forms to fill out and the agent needs to be able to understand them. An experienced agent will look for items such as per diem in the paperwork. This is when a buyer may have to pay the seller money if the property does not close on time. Not all foreclosure companies use per diem, but it is something to look for. It may be buried in a foreclosure addendum that a new agent may not see. If you do use an agent unfamiliar with foreclosed homes, make sure he is willing to ask questions about anything he is unsure of.
- Have a home inspector waiting. The owners of repossessed homes will have no idea of what problems may be lurking in the house. Make sure you have a trusted home inspector standing by to evaluate the home. The seller will allow you a contingency that if you are not satisfied with the inspection you can walk away from the deal without penalty. The sellers will allow a brief period for the buyer to have the inspections done and report any problems. A common time frame is ten days from ratification of a contract to purchase a foreclosed home. Have your inspector waiting; you will not have time to shop around for a home inspector after you sign the paperwork to buy a repossessed home.
- Be prepared to offer earnest money. Earnest money is good-faith money to show the seller you are serious. Cash offers may require at least ten percent of the purchase price for good-faith money. Be prepared to have at least a $1,000 in liquid funds to be held until the property closes.
- Look for a repossessed home, finally! Ask your real estate agent to search for “bank owned” or “corporate owned” homes. Search the internet for well-known foreclosure companies. Also search for well-known banks in your area who may have inventory on websites.
- Make an offer on the home. Ask your real estate agent for a comparative market analysis of properties in the neighborhood. This will give you an idea of what similar homes are selling for. You can ask for contingencies, such as the seller paying part or all of your closing costs, new appliances, etc. All they can do is say no. To get the best deal, avoid homes which already have offers from other buyers. This will drive the price up. There are other homes on the market; take your time and find your dream. If you do want a home with multiple offers, then leave off as many contingencies as possible. Make the offer as clean as possible and give them your best and final price. However, never give up contingencies, such as home inspections, financing and appraised value.