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The process of buying a foreclosed home varies from the process of buying a conventional home. You must be prepared for the specific challenges to get the best deal.
If you are interested in purchasing a foreclosed home, then it is best to work with a real estate agent who specializes in selling this type of property. He or she may be more familiar with the process than a typical realtor might be. This added insight can make the purchase easier to manage.
It is also important that you receive a letter of preapproval from a lender before buying a foreclosed home. This is due to the fact that sellers of foreclosed homes may be hesitant to accept your offer if you have not previously received approval from a lender. For home buyers who are up for a challenge, buying foreclosed homes can prove to be profitable if you know what you are doing in advance. Learn more about buying foreclosed homes in the sections below.
The first step toward buying a foreclosed home is to find a real estate broker who specializes in foreclosures. Oftentimes, real estate brokers work directly with banks to oversee the sales of foreclosed properties. Getting in touch with one of these brokers can help you tackle the process more smoothly. You can receive greater insight by working directly with someone who has experience in the foreclosure field.
Not only can this type of broker help you oversee the sale, but you may be able to gain access to foreclosure listings that are not available to the public yet. Real estate brokers who are employed by the banks to orchestrate foreclosure sales are often provided with information regarding newly foreclosed homes before the information has been listed on the real estate market. If you have not selected a home yet and are looking to expand your options, then this is a good way of seeking out information on multiple properties before the threat of competition begins to weigh in.
It is essential that you receive a letter of preapproval from a mortgage lender before you proceed with the purchase of a foreclosed home. The only instance where you will not need to receive preapproval for financing is if you plan to pay for the foreclosed home in cash. Otherwise, this letter is needed if you need assistance to complete the purchase of the home. When you receive a preapproval letter from a lender, you are receiving confirmation for the amount of money you can borrow from a bank or institution.
Related Article: How to Finance a Home Purchase
To receive approval, you must submit personal information to the lender, such as your credit score and annual income. This must be done before you begin looking at properties to buy. If you do not have a guaranteed loan to cover the remaining cost of a foreclosed home prior to submitting an offer, then your offer is likely to be rejected. You cannot purchase a home until you are certain of how much you can spend between the amount you have saved and the amount you are given from a lender.
Once you receive a preapproval letter from a lender and have a foreclosed home you wish to purchase, you must determine how much you want to spend to buy the home. Foreclosed properties attract a surplus of attention from interested buyers, as the homes are usually sold for a fraction of what they would cost through a traditional sale. To ensure your offer is selected over the competition, you must bid as high as you can comfortably go to secure the sale.
It is best to look at comparable foreclosures in the area to ensure that you are not offering too much before settling on your offer. While you want to stand apart from the competition, you do not want to mistakenly pay more than what is advisable for a home in disrepair. Calculate the cost of any repairs that the home needs before you settle on your offer price. Many foreclosed homes are in bad shape and need to be repaired properly before they are habitable.
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If the home you are interested in needs extensive repairs, then deduct the cost of repairs from the amount of money you are spending on the purchase price. You should not exceed your budget when purchasing the home, as this leaves you without any money to pay for the necessary repairs. By assessing the homes overall condition, you can determine if it a good buy. If the foreclosed property needs minimal repairs, such as a few cosmetic changes, then you may afford to purchase the home and make the repairs further down the line.
After you purchase your foreclosed home, you must set aside a budget to conduct the necessary repairs for the property. Unless you are a skilled contractor yourself, you are likely going to need assistance from a professional repairman to tackle the home improvement plans you have laid out. Extensive repairs, such as redoing a kitchen or taking down a wall, need a contractor’s approval and must be overseen by a team of professionals.
You can hire a contractor to assess the quality of your home and the repairs needed. He or she can provide you with an estimate of how much this may cost. You can then compare prices from several different contractors to ensure that you are not overpaying for the work necessary to repair your new purchase.
Related Article: 9 Home Repairs You Can Do Yourself