A foreclosure happens when a lender repossesses a property. That is after the lendee defaults in his mortgage payments. To recover as much money, the lender may sell the property. People searching for an affordable house to buy can consider a foreclosed property as an option.
How to buy a foreclosed home
There are several ways to buy a foreclosed home. Here are some helpful means that you may consider.
Find a foreclosure expert
Foreclosure purchases differ from traditional home purchases. Finding an agent who is experienced in this kind of transaction is crucial. An experienced real estate agent can provide expert advice as you move along with the process.
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Find the right price for the offer
Before you make an offer, make sure that you check for comparative market analysis or CMA. Comps will help you make an informed decision. Your agent can generate a CMA and help you with evaluating that report.
Secure a preapproval letter
If you don't have enough funds to pay the foreclosure purchase in cash, then a mortgage is the next option. First, you need to get preapproved for a mortgage. You will need that letter before you can make an offer.
A preapproval letter assures the mortgage lender that you mean business. A letter indicates how much you can borrow. It is determined based on your income and credit score.
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Keep in mind that you need to keep pertinent documents even after you have secured the letter. That is because a foreclosure purchase process can take several weeks to months. Typically, letters are good for 60 to 90 days only.
Expect "as-is" foreclosure sale
Typically, lenders sell foreclosed homes "as-is." Thus, be prepared for that scenario. You can include a home inspection contingency in your offer. This will give you the option to walk away if a major issue is uncovered during the inspection.
Once your offer is accepted, make full use of the time that you have on hand during the contingency period. Get help from specialists who can provide you an expert opinion on the property.
Devote time for the foreclosure purchase process
The foreclosure buying process can be unpredictable. Hence, you need to invest time and patience. A traditional seller would look to sell fast. That is not the case with lenders.
Often, selling the property quickly is not among their motivations. That means getting an answer to your offer can take several weeks to months.
Be emotionally ready to walk away
In a traditional home buying, both buyers and sellers are motivated to close the deal. That advantage does not work in a foreclosure purchase process. Mortgage lenders are not always as keen on closing a deal with a particular buyer.
The process of buying a foreclosed home can be long and winding. So, you need to be patient and to stick to your decisions. Otherwise, you might give in and settle for terms you would regret afterward.
