Foreclosures have become more commonplace in today’s real estate market.
In fact, we keep a list of new postings for San Diego County foreclosures, REO homes, and others that fall under the foreclosure umbrella right here.
Statistics show that foreclosures are actually up in 26 of the 50 largest metro areas across the United States (per RealtyTrac.com).
Pittsburgh currently sits at the top – foreclosures are up 49% from the previous quarter.
Pittsburg is followed by Indianapolis at 37%.
The top five are currently located in: Philadelphia, New York City, and Raleigh.
Foreclosures have also become an attractive buying prospect to many.
Banks are seeking to get rid of them, which means you may wind up with a great deal on a gorgeous home.
Still, there are some things you need to know going into buying a foreclosure, especially if you’re still a green horn to the market.
First, and foremost, forget about foreclosure auctions.
Many realtors and real estate experts agree that auctions and the processes involved can cause major issues for even the most seasoned of bidders.
Prospective buyers do not get a chance to inspect the home beforehand, for one, and if the home has been vacant for a long while, you can almost bet on there being existing damage.
Prospective buyers go to foreclosures to find a good deal, but an auctioned foreclosure can lead to a nightmare of repair bills, outstanding taxes, and other issues that turn a deal into a dilemma.
Another issue can be facing the current owner, especially if they are still living in the home when the auction is taking place.
If you buy the property, that can leave you with the task of evicting the former owner, which is an opportunity for vandalism.
It is not unheard of for owners to trash or vandalize the homes before being evicted – yet another headache.
A more attractive option, especially for those new to buying or bidding for foreclosures, come in the form of REO homes aka real-estate owned homes.
These are homes that you can purchase directly from the bank, as the bank is required to pay off senior liens such as back taxes.
You also won’t have to kick anyone out, and will be able to inspect the home for damages or needed repairs beforehand.
Something to make you more attractive, and to help you beat the crowds to a property you might have your eye on, is to get pre qualified.
A letter of prequalification for a lender can make house-hunting all the more easy.
The foreclosure market is one that is constantly shifting and changing, and is very much so competitive, so a letter of prequalification helps give you a huge advantage over other buyers.
Sellers are going to work much more happily with a potential buyer that already has secured financing – just don’t expect the same bank that is selling the home to finance you while also trying to get rid of the house.
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We’ve discussed home appraisals recently and what you can expect.
With foreclosures and REO homes, you can typically expect a low appraisal.
This can prove to be a hassle, as the amount of financing that lenders are willing to give depend heavily on the appraisal of a home.
A foreclosure runs the risk of damages, vandalism, and generally lower appraisals due to how it reflects on the area and vice versa.
If you are attempting to go through an FHA loan to get financing for your dream home, please note that the requirements on the conditions of the home are much stricter than with other homes.
Another unfortunate downside to foreclosures is that you will more than likely have to factor in the costs of repairs for your new home.
Foreclosures are typically sold “as-is” and many of these homes typically come in poor condition.
Even with REO homes, the bank is not going to expend their efforts or funds into making repairs on the home before the sale, nor will they lower the price of the home to compensate for any kind of damages.
You can still try to negotiate the price down, of course, but be aware that this typically doesn’t work out.
Foreclosures are often left in poor condition, either from the current or previous owner, or from having sat vacant for some time.
You can find an exceptional deal on an REO home or foreclosure, but you absolutely should be prepared for repairs and damages.
Some companies and experts will buy foreclosures and “flip” the home, remodeling it for the next owner or owners.
This practice tends to negate the deal aspect of finding a foreclosure, however, though you may still be able to find one for a fairly good price.
All-in-all, you shouldn’t be scared off by buying a foreclosure or REO home.
Many of them can be found in excellent condition and for amazing prices.
If you’re not afraid of a fixer-upper, they can be especially attractive.
Just knowing the rules, being educated and knowing how to negotiate and move the process along quickly can play strongly in your favor.
If you have your eyes set on a foreclosure or REO home, be sure to move quickly but cautiously.
The foreclosure market is surprisingly competitive, and there are many more deal hunters out there that will quickly snatch up the property if you are not ready.
Know what you are looking for, know your price range and how much home you can afford, and be ready to put some time and effort into maintenance and repairs – you’ll do just fine.
If you are looking for a foreclosure or REO home in the San Diego County area, we can help!
Our San Diego County foreclosure search updates daily, and gives accurate and thorough information on foreclosures and REO homes throughout San Diego County.
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