 6 Questions Foreclosure Buyers Should Ask · Is now a good time to buy a foreclosure? This is a very common question from both real estate professionals and prospective buyers. Because local market conditions vary, the answer is different from market to market. Check with us for information about the area you have in mind. · What’s the first step buyers need to take? Buyers need to be pre-approved for a loan before shopping for a foreclosure. If you are buying a foreclosure as an investment or second home, you must understand that financing the home will be more difficult than a primary residence. Lenders typically charge higher interest rates and require larger down payments for investment or second homes. · How can you tell a bad foreclosure from a good one? Making a sound deal can be tricky. Buyers need to be wary of unpaid liens, including mortgage debt, taxes, construction loans, home equity lines of credit, and possibly a second or third mortgage. Unless the property goes through a foreclosure auction and becomes a bank-owned REO, the outstanding foreclosure liens and fees could be simply transferred to the new owner. You don’t want to fall into the same financial trap as the previous owner! · If I’m a qualifying borrower, can I appeal to banks for better loan terms? Lenders are drowning in defaults so they may be motivated to cut a deal. If you have a good credit score, many banks will offer you a below market rate loan on a bank-owned home. Unlike paying down with points, this doesn’t cost anything in fees and it gives you the ability to spend more for the home. · What are the costs of buying foreclosures? It takes money to make money. The best opportunities are for buyers with cash. If you are planning to rent out the property or even resell it for a quick profit, make sure you consider the carrying costs. These include sales commissions, marketing costs, vacancies, taxes, insurance, and maintenance costs. Once you’ve calculated the expenses you should add another 10 to 15 percent. If you don’t build in a “surprise fund,” you might become the next foreclosure statistic. · How does choice of neighborhood affect foreclosure investments? Buyers looking for a good investment should avoid neighborhoods overrun with foreclosures, particularly newer subdivisions in overbuilt exurban areas. Look in well established neighborhoods with good schools and transportation. If you are in a market where prices are still falling, you must take that into consideration when submitting an offer. The Bottom Line Is: There Are Many Good Deals Out There For The Buyer With An Informed/Certified Agent! |