Foreclosures! For sure we’ve got ’em as indicated in a previous post. If you’re looking for a foreclosure, though, there are few things to consider first.
- What do you really want when you say foreclosure? Most buyers say foreclosure, REO or short sale as shorthand for a bargain home. Think about it. You don’t really care if it’s a foreclosure, do you? What you want is a very well-priced home so you get value for your money. Since that is the case, be sure to let your Realtor know that. Otherwise, you might get just a list of REOs.
- Foreclosures usually mean more competition. Since the banks are overloaded with these “non-performing ” properties right now, they are priced very competitively, so they attract lots of competition from other bargain-hunting buyers. You need to be prepared to move fast. If you’re the type who likes to mull things over, not a bad idea when forking over hundreds of thousands of dollars, this market niche may be too fast for your taste.
- Be prepared to move fast. So many homes are on the market these days that frequently buyers avoid the preparatory steps and go right for the cake–looking at homes. You Realtor will tell you to get yourself pre-qualified with a good lender. Don’t dodge the call. It takes only a few minutes. You not only now know what you can afford to buy and what the rate will be, but, pre-approval in hand, you can now instantly offer on that foreclosure that just came on the market.
- Be prepared to wait. Banks have different modus operandi. Some will immediately take your offer, especially if you have a down payment, have that lender’s letter and offer close to the list price. Others wait and collect as many offers as possible, then counteroffer all to make their “highest and best” offer. Then, it’s a guessing game. If you are offering on a short sale, a pre-foreclosure, be prepared to wait for a significant amount of time, sometimes months.
- Inspect, inspect, inspect. You should never buy a home without a professional inspection, of course. It’s even more important for foreclosures and pre-foreclosures. Often the previous owners had been in financial difficulties for quite some time before surrendering the house. Most likely they couldn’t or didn’t do any maintenance either, especially once the foreclosures was a done deal. Sometimes, banks repair REOs damaged by their original owners, but almost always the job is slapdash. Remember that when choosing a foreclosure over someone’s lovingly nurtured home.
- Get a good broker. This is crucial. The listing agent represents the seller. That would be the bank in the case of the foreclosure and for short sales often several banks. You need a professional who understands the process and represents your interest. Ideally, you will find an agent with experience who understands the various addenda which all banks require and can explain what you are signing to you.
- Take the time to understand the procedure. Your good broker should and will be eager to explain the process, the loan, the rates, the comparables and help with any negotiation during the inspection period which in California is usually 17 days. The bank may try to shorten this time. Again, you are shelling out big bucks. Don’t be the schmuck who doesn’t read his loan docs.
Getting a bargain-priced home is a joy forever. In future years, your friends and relatives, even casual acquaintances, will marvel at your financial acuity once prices skyrocket once again as they are bound to do here in the Golden State. But make sure you are getting a bargain. Repairing sloppy cover-up work or removing improperly-maintained systems, whether air conditioners, pool equipment, roofs or electrical wiring can wind up costing far more than anticipated. Make sure your repo is really a bargain.