Homebuyer Tips For Buying That Foreclosed Home!
In today's market lots of home buyers are interested in buying a foreclosed home because so many are often priced under market value. When the bank prices a foreclosed home under the comparable sales, you can expect multiple offers to be the response which means you could be up against some pretty stiff competition.
It's not unusual for a foreclosure home to receive 10 or 15 offers. Sometimes the bank will throw out all but just a couple offers and then ask the selected buyers to re-submit what is called their "Highest and Best" offer. Sometimes the bank will simply accept the best offer from the beginning. Below are a few tips to help you select the right price and terms so your offer will stand out above all the other offers:
Do the Homework & Know the Property History
Ask your real estate agent to find out the bank's purchase price on the Trustee's Deed. Many times, you can get this from the county tax records. You should compare that price to the price the bank is asking.
Look at the total amount of loans that were once used to secured to the property. Somewhere between the mortgage balance(s) and the foreclosure sale price is the amount the bank will typically accept.
Determine Comparable Sales
So many times the list price has little bearing on the value of a home. The market value carries the most weight. If you are up against competing offers, be aware, some buyers will offer more than list price.
Look at the last three months of comparable sales for that neighborhood to determine how much this foreclosed home is worth. Only use homes that match this foreclosed home in regards to the style, square footage, number of bedrooms, baths, the homes amenities and don't forget the homes condition.
Look at all pending sales in the neighborhood.
Look at the active listings. These are most likely the listings that other buyers will use to base their offer because these are the only homes a buyer will actually be able to tour to use as a comparison.
Analyze all Neighborhood Foreclosures that have Sold with the Past 3 Months
Pull the history of the neighborhood listings to determine the list-price to sales-price ratio. If most of those listings are selling for, let's say for example, 3% over list price, you may need to make your offer 4% over list price.
Ask the Listing Agent About The Number of Offers Already Submitted
If there are no offers on this home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.
You Will Neesd A Pre-approval Letter
You will need to submit a pre-approval letter not a pre-qualification letter. Get pre-approved by the lender who owns the property. You do not have to use this lender for your loan, but many banks will require that you submit a pre-approval letter from their lending department, because banks feel confident with their own lending department. then you can submit a pre-approval letter from your own lender.
Repairs and Inspections
Sometimes banks will pay for repairs, but most likely the home is being sold "AS IS". If there are issues or concerns found during the home inspection, you can try to re-negotiate or ask the bank to make repairs but be prepared that the bank could say no, this really varies from bank to bank.
Shorten Your Inspection Period
You will be considered a more serious buyer if you shorten the inspection period to 3 to 5 days.
And Please Don't Forget to Consider the Appraisal
If you offer over the list price, be sure to keep in mind that the appraisal will need to support your offered price. Some Multiple Offer Notification Forms state the buyer will have to pay the difference from between the sales price and the appraisal price which means you will have to invest more of your money into the home or it won't close.
And as usual, if you or someone you know is looking to buy or sell a home, I will be happy to help you!
NO ONE Knows Real Estate Better ~ "Helping Families Since 1984!"
Eunice Waller
Prudential Simpson & Associates
Make it an Awesome day!
