Many people are enticed to buy foreclosed homes due to their fantastic pricing.
According to the National Association of Realtors, as of June this year, foreclosed homes were sold for an average discount of 18% below market value.
While it is certainly an opportunity to buy a foreclosed home due to its fantastic pricing, there are, however, challenges in buying this type of home. Here are some tips:
1. Get preapproved for a mortgage
Unless you plan to buy a home in cash, it is important to have a preapproval letter from a mortgage lender prior to house hunting. The preapproval letter describes the amount of money you can borrow based on your income, credit score and assessment of the lender.
Don’t expect that the bank selling the foreclosed home will also finance the mortgage. Mortgage transaction and selling a foreclosed home are two different transactions. In selling a foreclosed home, the bank is simply trying to dispose an asset.
2. Impersonal Transaction
For a seller of a foreclosed home – normally, mortgage lenders or banks, selling a foreclosed home is a very impersonal transaction. Banks have no attachment to the homes they are selling; as such, a cute note or a compelling letter to the bank doesn’t have much weight.
3. Know the average sale price of comparable foreclosed homes in your area
4. Expect the foreclosed homes to be stripped bare
Don’t be surprised to see foreclosed homes stripped bare. Previous owners may have hard feelings towards the banks that foreclosed their homes; thus, they got what they could get before leaving. The basic things such as lights and faucets may be missing. Account for the missing features and fixtures in your offer.
5. Remember the “as is” rule
While you may account the missing features and fixtures in your offer, you cannot expect the seller to replace or repair these missing features and fixtures due to the “as is” rule in buying a foreclosed home. The “as is” rule means that you cannot get a discount to compensate for repairs.
As a buyer though, you are allowed to have an inspection on the premises of the property to be sold. Make the most out of this inspection by hiring people who can competently assess and fix damages from pests and leaks.
Whether you are a first-time home buyer, first-time home seller, empty nester, thinking about selling a home or buying a home, do contact the Guldi Real Estate Group. In Southern Maryland, the Guldi Group is the number one real estate team.