How to Buy a Foreclosed Home: The Truth!

Everyone wants a DEAL, but not everyone gets a DEAL when they buy a REO.  THAT is the truth! 

One of the obstacles I have ran across is that many people think they KNOW how to take advantage of the system.  In an effort to educate home buyers in the realities of the Foreclosure world I would like to dispel a few myths and offer some helpful tips.

1.  You DON'T get a better deal if you make a purchase without a Realtor.  Proper representation is key.  You wouldn't go into a lawsuit without a lawyer representing you, so why would you make the largest purchase of your life without someone who has a fiduciary duty to represent your best interest.  You need a Realtor for a variety of reasons. 

• First, the best homes listed at the best prices move within 10 days.  You must have someone scouring the MLS for the daily listings. 
• Second, only a professional will know the listing history of a home you are interested in.  This is important because often the best way to get a deal is if a Bank Owned property has been sitting for more than three weeks and the bank is willing to take less for the property to get it off the books. 
• Third, going directly to the listing agent does NOT save you money.  The bank has a contractual obligation to pay a set amount of commission.  The bank will not take less for the home because you used the listing agent to write the offer.  Instead, that agent gets all the commission and you DON'T have someone exclusively representing your best wishes. 

2.  Another myth is that the banks will take significantly less than asking price just to get rid of the property.  Within the first 10 days they rarely will accept much less than asking price.  If a home is priced well there will likely be multiple offers and sometimes as many as 10-50 within the first few days.  If your heart is set on that home you may even need to offer 5-10% over asking price.  Your Realtor should compile a comparative market analysis which will indicate where the price may end up.  This is where is gets sticky.  If there is a lot of demand for a home it will often get offers far over list price and often far over where the comps put the price.  BEWARE!  Don't get caught up in the frenzy.  You must keep a level head and try to keep your heart in check. 
This is a good reason NOT to get involved in auctions as well.

3.  Sssshhhh!  Listen closely:  Price is relative in the Bank Owned process.  If you can offer list, or close to list, price you can ask for cash back for closing costs.  This reduces the cost out of pocket for you and keeps real estate prices more stable.  This is one of the secrets in the REO world.  Now, this is not an option if the bank has a pile of offers, but it can still work with multiple offers if you are a super strong buyer with 20% or more down payment.  You can't always ask for closing costs, but your Realtor can evaluate what the purchase climate is for that particular property and together you can make the call.  The bank could always give you a counter offer striking that out of the contract. 

Buying a home is a complicated process and buying a Foreclosure is certainly no easier than a traditional sale.  It is a fast paced transaction that requires attention to detail and a lot of PATIENCE.  There are so many nuances and so little time.  I will offer more tidbits at a later time.

Getting a DEAL is so satisfying:  Don't give up there is one waiting for YOU!