When you’re looking to buy a home, at a reasonable price, a foreclosed property may be an ideal fit. Foreclosed properties are also called bank owned properties, repossessed homes, or real estate owned (REO) homes. These home are priced to sell and are usually vacant which can help you get into the home quicker.
When you find bank owned houses for sale, it’s important to compare the price to other homes in the area. Knowing the market value of similar homes will increase your chances of making a wise, successful foreclosure purchase. To help you determine the most accurate market value (amount the finished/repaired property is likely to sell for), consider instilling the help of a real estate appraiser. An appraiser can determine the final market value of the home based off of comparable homes in the area (homes that have recently sold). Learning the end value of the foreclosure, after repairs have been made, will help you determine if the purchase price is the best deal.
After looking at a list of foreclosed homes for sale and determining which house is best for you, meet with a realtor who specializes in foreclosed homes. This is important and will give you an edge when it comes to making the best purchase. Keep in mind, these foreclosed properties are being sold as-is and you won’t have the option to negotiate most repairs. Hidden costs can include something minor like repairing drywall damage to more serious expenses like replacing a kitchen that has been stripped bare. When you know the neighborhood comparables, you will have a better idea of how much money you can reasonably put into the property and still make a profit if you should decide to sell it.
Although anyone can purchase a foreclosed property, having homeownership under your belt will be advantageous. It’s beneficial to know how to purchase a home, the costs associated with taxes, how to get bids from various contractors when you need to repair your roof, when to call a plumber and when to fix it yourself. In other words, having worked with a variety of contractors before purchasing a repossessed home will give you an advantage over those looking to purchase without having previously owned a home. Having a list of contractors you’ve worked with in the past will come in handy when it comes to repairing damages on a foreclosed home.
Obtaining financing for foreclosed homes is a bit different than obtaining financing for non-foreclosed homes. Many investors rely on commercial loans because they are typically fixing the house up for a quick resale. FHLMC HomeSteps First Look loans give buyers the ability to purchase a home during the first 20-30 days of listing (varies by state), without having to compete with investors. Loans like FHA 203(k) loans, sometimes called “rehab loans”, allow the buyer to finance the cost of the home and necessary repairs and are only available for owner-occupied properties (not for properties you intend to rent or flip for profit). Talk with a real estate agent to determine the best financing for your purchase.