I have many buyers right now who are looking for distressed properties, and I completely understand where they are coming from. The thought of buying a home for an inexpensive price and fixing it up appeals to many people. Instant equity is a wonderful thing!
For my investor clients, this is not a problem. They have cash, they want to keep offers super clean, and they can close quickly. They are ready to go and see the house as soon as it hits the market because they want to be first through the door. It is a thing of beauty.
On the other hand, I have many buyers who want to purchase distressed properties using some type of financing. Most of them want to go the FHA route, and that makes things a little more difficult. If there is a buckling basement, an inoperable furnace, or leaky ceilings, an offer including FHA financing will more than likely be passed over by the bank. What can you do if you do not have the cash? Here are a few tips:
1. Be sure that you speak with a mortgage representative before you begin your home search. Ask them about financing options as related to the types of properties that you wish to purchase. Most HUD homes and other distressed properties will require and FHA 203K or other type of a rehab loan in order to purchase the home.
2. Be prepared to submit a clean offer. The best offer for a distressed property is a cash offer with a small window for inspections, and the promise of a quick closing. Then, you may have a shot at getting the house. If you must finance the purchase, it is best not to ask for concessions from the seller. The bank will be looking at their net. If you ask for repairs, closing costs, and home warranties, your offer will move toward the bottom of the pile.
3. Be prepared to offer more than the asking price. If you are financing your purchase, you must get the attention of the representative from the bank who is reviewing the offers on the property. A low offer that calls for financing will not get positive attention. A clean, higher offer is more likely to get consideration. If conventional financing can be used, that is the next best thing to cash.
4. Be prepared for competition. If you think that it is a great deal, so do other people. That makes it more difficult to get an accepted offer on a home. More than likely, if your realtor is getting you into the properties as they hit the market, and they are paying attention to deadlines, the fact that you are not getting an accepted offer probably is not the realtor's fault. Make sure that you are willing to submit quick, clean offers that include a cash, or the easiest type of financing possible.
5. No matter what, do not be afraid to make an offer. Make the offer as soon as possible. If you wait, the bank will make a decision without you. Most banks are giving responses in a matter of days or weeks, not months in the case of foreclosures. (Short sales can still take some time.)
Dawn Isenhower
Realtor
Coldwell Banker West Shell
Milford Office
office: 513-831-8001
cell: 513-236-1254
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