Finding that Great Foreclosure Deal in Massachusetts and New Hampshire
We all know the stories about people who've made lots of money in real estate, buying cheap and flipping. Heck, there are people out there making tons of money by telling people about these deals and purportedly teaching them how to do it.
Guess what? They are the ones making money, by taking it from the poor suckers who believe their fairy tales.
Unless you have time and cash to attend auctions, and are prepared to take risks on properties that you have not been able to do your proper due diligence on, as a conventionally financed home buyer you are going to find yourself limited by reality.
When a property goes into foreclosure and goes to auction, there is nearly always a predetermined minimum that the lien holder (the bank) is prepared to accept. They are not going to give the property away. So either the property sells to a cash-strong bidder who gives the bank a reasonable value, or the bank takes ownership at the auction. The property becomes "bank owned" and eventually is listed for sale.
If the property is in great condition, the bank usually treats it as any other property and gets as close to market value as they can. It is when the property is in poor condition - often the case - that deals can be done. Not only do most buyers not want to deal with houses in need of major work, but unless they have very large cash down payments on these properties, they have a problem getting financing. So that limits the buyer pool substantially. The FHA offers rehab financing for buyers with as little as 3.5% down, but they are required to use licensed contractors for the work, and the money goes directly to the contractor, so do-it-yourselfers don't qualify.
When and if a bank does approve a short sale - and there are strict conditions tied to this - it generally is also looking for reasonable value. Sometimes you'll see a short sale advertised at half its value. That's always nonsense, meant to get you to make an offer. The bank will never go along with that price. A huge amount of time is wasted around unrealistic short sales - banks usually want at least 85% of true market value.
Let a good Buyer Agent guide you through the quicksand of bank owned properties and short sales.
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