"My friend Mary just got an awesome deal on a foreclosure! She got the house for $35,000 below market value."
In this market, who among us has not heard a story similar to that? Sure, when you know just what you're up against and have an experienced Realtor to guide you, foreclosed and distressed homes can be a fantastic opportunity for some walk-in or sweat equity. But there is a lot of the story missing; and buyers out to get a steal in the the real estate market often have to find out the hard way that it is not just making a low-ball offer and signing on the dotted line.
First, when you're negotiating to purchase a foreclosed home - you are at the mercy of the bank, investor, or servicing company who is handling the sale of the property. The whole process will happen on the terms of the seller; and while it may take them days to answer a buyers offer, they expect all counter-offers and documentation from the buyer to be submitted immediately.
They will outline the closing date, inspection and financing timelines. Many of these homes are without utility service and/or have been winterized, which can add $200-$300 in additional inspection expenses. In most cases, the home will be sold as-is (except for the case of termite infestation, which all sellers in this area are compelled to treat by law), therefore many of these homes will not pass FHA or VA Appraisal requirements.
Buyers can spend up to $1000 on inspection costs, only to find that the condition of the house is unacceptable to the lender, or buyer - or both. Having to start again the search and negotiation process can be frustrating, especially with a lot of time and money having already been spent.
So if the process to buy these foreclosures is so difficult, why do buyers even bother with the process? Simple! They remain in charge of one major aspect of the sale - the price. Buyers have quite the advantage in this current real estate market because there are so many distressed homes for sale. Many of these homes are being sold for thousands (and even tens of thousands) below a "typical market value."
Even the homes that need some work can represent a great profit opportunity to the savvy buyer. However, a lot of the available homes out there are in terrible condition, and will require thousands of dollars in repairs and updates. Therefore, what a buyer will spend in total on the property must be considered.
Many buyers who have already purchased homes are surprised to find that they have little room to "make demands" like they have in past transactions. First-time buyers - for whom the buying process is already full of surprises, can be easily (and understandably) overwhelmed by the additional difficulty added when buying a foreclosed home.
This is why it is essential to have an expert Realtor in your corner. Now more than ever, having a skilled agent guiding you through the process step-by-step will help ease what is likely to be challenging at the very least. With all the changes happening in lending and the housing market - consumers need someone on their side who stays informed, and is out there "fighting the battle" for their clients every day.
So before you decide to "hop aboard the foreclosure train", be sure to contact an experienced Realtor who will help you examine the pros and cons. Each buyer's situation and home for sale are unique, so be sure you have an expert to help you decide what's right for you.