If you want to take advantage of the market and to get a good deal on a foreclosure, apart from having sufficient cash, there are some few things you need to know before you complete the transaction. Before you get started, you should understand what foreclosure means. Succinctly, a foreclosure is a bank-owned property, often known as real estate owned (REO). For whatever reason, the actual owner stopped the payment of them, so the lender (e.g., Wells Fargo, Bank of America, etc.) legally took ownership of the property. When a Foreclosure is a good deal When you intend to buy a foreclosure, here is how you know you are in for a great deal:
1. “I love it” - This is what you will say after you have viewed the property, driven around the neighborhood and carefully checked the property fundamentals. You love the home because it is almost what you were aspiring for in becoming a rental property owner or new home.
2. “ I plan to own it for a long time” - This will be your reply when asked. Regardless of how good a deal you think you are getting, the primary point when it comes to ownership is a minimum of five years. If you don’t intend to own the property for that long, it is best you remain a renter. Remember, the three most vital words in real estate are “Long-term ownership."
3. “It is in good shape” - This is what you will say when your family members and friends ask you about the physical state of the property. A vast majority of buyers do not know how much a property renovation will cost. Here is the reality, repair is expensive and could take a very long time beyond your imagination, so make sure the contractors purchase the fixer-uppers.
4. “ The price is similar to recent sales in the neighborhood” - This is what you will notice when you conduct a comparable market analysis of properties nearby.
Confirm Your Suspicions
To further help you confirm that you are about to make good foreclosure deal, you need to compare mortgage rates, get contractor estimates, and check at least eight other properties so you will be sure what the market has to offer. Following these steps will reduce any risk and ensure the foreclosure you bought was indeed a “great deal.”
To get the best deals and avoid buyers remorse, talk to your real estate agent about the local area and any insider information.