Foreclosed homes present an interesting opportunity for those struggling to buy. The selling season should be in full swing but our economic issues have caused a housing slowdown. There are not enough homes available and many are way above what people can afford. Buying a foreclosed home may help you take advantage of the historically low mortgage interest rates before they increase.
Foreclosed homes sound scary but essentially you buy a house that someone else could no longer afford to maintain. It may be in fine condition but you need help making that decision. Foreclosed homes are a great option but don’t go through it alone. These are five smart steps if you’re considering a foreclosure.
1. Look at the homes available at HUDhomestore.com
HUDhometore.com is a website that’s contracted with the U.S. Department of Housing and Urban Development Office to showcase foreclosed homes for sale all over the country. HUD preferences residential buyers, so those who want to live in the homes they buy get about a two week head start over those who are investing in houses to resell. HUD foreclosures have to meet a certain basic standard before they can be sold. You should search on this site to get a sense of the prices in your neighborhood and what’s available.
2. Select your real estate agent
Learning about the homes available online is a great start but it’s not going to get you into one. In order to buy a foreclosed home, you need to work with a HUD-certified real estate agent who’ll help you avoid buying a money pit. Interview several agents but don’t sign with the first one you talk to. Learn about their experience and their typical price points. If possible, look for someone who has expertise in your neighborhood. After the agent, loop in the rest of your home-buying team including your tax preparer and possibly a real estate attorney.
3. Get financing and settle price range
Your real estate agent may lead you to lenders who work in your neighborhood and at your price range. It isn’t easy to borrow these days, so good service is key. Foreclosures are complicated so you want someone who is willing to walk you through step by step. If you’ve saved up a certain amount, check with family members to see if they are available to help with financing. If you buy from HUDhomestore.com, you may be able to get a Federal Housing Authority loan, even if the price of the property is already low.
4. Visit the homes in the neighborhood and contact owners
With your team assembled and financing available, it’s time to visit homes from HUDhomestore.com. Drive around the neighborhoods and see what amenities are available as well as consider how the location may change over time. Your agent will help you contact the owners, whether it is a private lender, bank or trustees.
5. Inspect the property and make an offer
Inspection is always important but especially with foreclosed homes. You certainly shouldn’t make an offer on a home with an unstable foundation even if the price is low. Educate yourself on how to find a good home inspector because they can save you hundreds of thousands of dollars. Once you’re satisfied with your inspection, you can make an offer. Try to avoid contingencies and don’t ask for appliances to make the offer strong. You’re competing with investors and cash buyers so you’ll have to prove that you are just as qualified.
Buying a foreclosed home can be complicated but it can also save you money in the long run with the proper team and information.
WSB Radio’s Ilyce Glink Show – May 25, 2014
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