There are many real estate investors who make a good living buying, renovating, and reselling foreclosed properties. Many residential home buyers decide to investigate buying foreclosures because the costs are much lower than a standard real estate transaction, and the right deal could mean that they get their dream home for a fraction of the actual retail price.
While buying foreclosed properties sounds like a great idea, it is important to remember that the buying process for foreclosed properties is much different than a standard, retail real estate transaction. Before you dive into buying any foreclosed properties, there are certain things you need to keep in mind.
The Transaction Is Very One-Sided
The majority of foreclosed properties are purchased through a single real estate agent through an auction. In most cases, foreclosure auctions require buyers to pay in cash. Most foreclosures are owned by a single bank that wants to get rid of the properties as quickly as possible. If you do decide to get involved in buying a foreclosure, then you should not expect to be able to work through a network of agents, or talk to a variety of property owners.
In most cases, foreclosures are either paid for in cash, or the buyer must arrive to the auction with a pre-approval letter from a lender that is valid. Not every foreclosed property is sold at an auction, but every foreclosed property transaction does require money upfront in some way.
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Real estate developers and investors have the resources to buy foreclosed properties on a regular basis, but it does take some work for an individual residential home buyer to get the funds needed to pull off a foreclosure transaction.
Don’t Bother Negotiating
The closest most banks get to negotiating on a foreclosed property is through the auction process. But even with an auction, there is a minimum amount the bank will accept for the property. If the auction does not meet the bank’s minimum amount, then the property will stay on the market. If you try to get into buying foreclosed properties, you will find that there is almost no room for negotiation when it comes to the selling price, or the terms of the deal. If you want to buy a foreclosed property, then you need to be ready to pay upfront and on the spot.
When you buy a foreclosed property, what you see, is what you get. In standard mortgage transactions, the buyer can ask that certain repairs be made to the home before the final sales agreement is signed. With foreclosures, there are no home inspections and the seller will not make any repairs to the property. If you buy a foreclosed property, you buy it as-is.
If you intend to start investing in foreclosed properties for any reason, then you should also contract the services of an experienced real estate attorney. Not only are foreclosure transactions quick, but they are complicated as well. You need an expert on your side to help you handle all of the paperwork and processes that go with buying a property at a significant discount.