Warner Robins Foreclosures: What you need to know before buying a foreclosure in Warner Robins.
Purchasing a foreclosure or Real Estate Owned (REO) home can be a great investment. Many local "house flippers" are making huge profits, even in this declining market. However, foreclosures are very risky. Instead of a making money, you could easily end up with a money pit.
As with most investments, the more you educate yourself, the better your chances are at success. Here are some tips you should know before buying a foreclosure or REO property.
1. Do your homework! Find out as much info about the home as possible. There are numerous free or low-cost websites available to assist you. Start with your local tax assessor. (Houston County, Bibb County, Peach County, GA Tax Assessor Search). You can also find real estate info at: www.zillow.com, www.trulia.com, your home's value, realtor.com. Be sure you visit the home in person before making any decisions.
2. Act quickly. Once you have completed your research and found the right property, don't wait to submit your offer. There is a lot of competition in the foreclosure market & multiple offer situations are common.
3. Have a pre-approval letter from your lender. If you are financing the home, a pre-approval letter should be submitted with your offer. If you are paying cash, you will need verification of funds from your bank.
4. Have funds available for a deposit/earnest money. Fannie Mae has programs that allow owner-occupants to put down as little as $500. A cash investor may need up to 10% of the purchase price for earnest money. Either way, sellers will take your offer more seriously with a deposit.
5. Must read for "house flippers". Fannie Mae's "Prohibition of Property Flipping in HUD's Single Family Mortgage Insurance Programs, FR-4615" Short version: If you are an investor flipping a home, you may have to wait 90 days or longer to flip it. This rule has changed several times over the last few months so it is important to stay up to date with the changes. There are also additional details you must know if you are selling to a buyer using an FHA insured loan. Not knowing this info can cost you thousands.
6. Avoid courthouse auctions. Buying a foreclosure at an auction is risky, even for seasoned investors. There is little or no opportunity to inspect the property and you may inherit all the liens that are attached to a foreclosed home. If you are buying at an auction, refer to rule #1.
7. Buy Title Insurance. Title insurance is always a good idea, but even more important with REO properties. Title insurance will protect you if the property was not properly foreclosed upon or if there were unknown liens attached to the property.
8. Make sure your contract clearly states that the seller (bank) will have all utilities turned on for the inspection/due diligence period. Write this in your contract. A home inspection is useless without electricity and water turned on.
9. Negotiate upfront who will be responsible for termite inspection, damage and treatment if needed.
10. Be aware of per diems or other hidden cost: Many banks are charging a per diem (usually $50-$150) if the buyer cannot close on time. Make sure your lender and closing attorney are aware of this. A delay of a week or two can add up quickly and cut into your budget. If the delay is caused by the seller, they will usually waive the per diem.
11. You will probably not close on time. With the large number of REO properties on the market, and the legal work that needs to be completed, foreclosures will usually take longer to close. No, you cannot charge the bank a fee for closing late, but be prepared to delay moving, renovations, repairs, etc.
12. Know what block out/grace periods are in effect. Many sellers are now blocking investors from submitting offers when a property is first listed. This block out period is usually 15 - 30 days and designed to give owner occupants an advantage. Make sure you know upfront what restrictions are being place on the property your interested in. If you're looking to live in the home, take of advantage of the grace periods. If you are an investor, find out if the bank will accept "back up offers" until the grace period ends.
13. Check if any fees are owed to the Home Owners Association and negotiate who will pay these. This is one of the most common errors a closing attorney/title company will make. HOA fees are often overlooked, but will catch up to you eventually. Many HOA fees are not recorded as liens, but they will need to be paid before you close.
14. Be prepared for a short due-diligence period. Many banks are limiting the due diligence period to 7 - 14 days. This is the only chance you will have to inspect the property and possibly back out of the deal without penalty. So have a qualified home inspector ready, make sure utilities are on and it is also a good idea to have a plumber and HVAC company available for a more thorough inspection. Be aware that it is not uncommon for a home to be stripped of plumbing, wiring, water heater, hvac units etc, while vacant.
15. Use a REALTOR experienced in foreclosure and REO properties. An experienced REALTOR is familiar with these tips and how to apply them. Your REALTOR's commission is paid by the seller, and costs you nothing. Your REALTOR will know how to negotiate with the banks and find the right properties for you. He or she knows the FHA guidelines, bank restrictions, and can get you the latest home info from the MLS. A REALTOR may also be privy to some REO properties before they hit the market.
View foreclosures in your area at: Warner Robins Foreclosures
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