My New Blog

For the past two years we've seen a steady rise in the sale of foreclosures and other distressed type properties. This has become a specialty market for many local real estate agents. I'm sorry to report that we can expect to see a rise in these sales for a few more years. Are these really good deals, and what is the process to buy one of these properties?

First of all you will need to build a team of professionals to help you through the process. Find a successful Realtor in the market you have targeted to buy a home in. Have them assist you in selecting a longtime Mortgage representative who can pre-approve you for the amount of home you are looking to buy. Determine the location, price, style, and amenities of the home you want and begin your search.

Your agent will have access to most of the distressed homes through their local Multiple Listing Board. They will also search the HUD site, and other foreclosure sites. Once you have found your home you need to understand the system and how it works.

There are many stages of the foreclosure process. You need to know which stage this home is in. Is the seller current with their mortgage payments, but they realize they can't pay off their mortgage for what they will receive for the sale of their home? If this is the case then you'll be involved in a "Short sale". The Lender will have final say on what the terms of the sale will be. This process could take up to 3-4 months for approvals from the Lender. In some cases you will be tied to this agreement, and they will take multiple offers at the same time and pick the best one. This can be a very frustrating and one sided negotiation. Just know going in that you need to know the Lender's financial stake in the home, and be aggressive in getting an answer from them. If the Lender doesn't act like they want to sell the home...this could take some time. They should be willing to provide an estimate of the time it will take to close.

Working with HUD on a foreclosed home is fairly straight forward. Your agent must be an approved  HUD Agent and will submit your offer on HUD forms. Some homes are restricted to owner occupants and some are open to investors as well. Inspections are advised but HUD will rarely repair any items for the buyer. You can request money in your offer for some repairs. You are basically buying these homes "as is". Expect some competition on the good homes, which will test you and your Agent's negotiating ability. Delays are almost a certainty in these sales, so be patient. The longer these homes are on the market, the lower the price will be. HUD is very good at lowering the price until it sells. 

Lender owned listings can be a very big waste of time if you don't ask the right questions upfront. If the home has a private mortgage insurance policy on it, the lender will wait to get an amount above what they will be paid by the policy. They won't tell you this and they'll leave you hanging for months. Lender's will also accept multiple offers and sit on them for weeks or months until an offer comes in that they like. You need to ask if other offers exist, and if there is an P.M.I. policy in place. You need to ascertain what their motivation level is before you start the process. Second Lien Holder's will try to bid on homes when they feel that's their only chance of getting their money back. Be sure to find out how many lien's are on the home.

When you are considering a home...Be sure to know what similar properties sold for in the past 6 months. How many distressed homes were sold in this area? Get realistic estimates on the repairs needed to get the home up to market quality. Some homes won't qualify for FHA or VA loans if there are numerous repairs needed. 

My best advice is to go out and find the best home for the best price....period! If that is a short sale home, pre-foreclosure, foreclosure, or any other market ready home. Just know the rules going into all negotiations. Happy Buying & Selling!

Jeff