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KEYS TO BUYING FORECLOSED PROPERTY

By
Real Estate Agent with Royal Shell Real Estate, Inc.

There can  be a lot of frustration in buying a foreclosed property, especially if you are a first time home buyer or new to the property buying experience. Here are some things that will help you before you start the process.

1. Negotiations. When banks list properties, they follow their systems in order to price a property to sell in a quick timeframe(usually 30 days or less). They do not typically negotiate on price, especially during that first 30 days. After every 30 day period, they will reassess a property and reduce if the property is not sold. If a bank owned property is overpriced, you may be better off waiting until that initial 30 days are over. Ask your realtor to keep an eye on a certain property that you are interested in if you find yourself in that situation.

2. Cash is king... sometimes. In most cases, banks have done a good job of pricing properties to sell quickly. If you find a great priced property, then chances are, other people have as well. In the under $100,000 price point many first time home buyers are finding themselves being outbid by cash investors or higher offers. If you find yourself getting ready to put an offer on a property that has multiple offers, especially if it is in a lower price point, expect competition from cash buyers. There is a way to beat this. PRICE. People hate the idea of paying more than asking price. I am not sure why, but it seems no matter how low a property is priced, people will want to offer less. I was doing a BPO on a property today that was listed at 15,000. When I told the next door neighbor that, his comment was "They won't go lower?" I guess they feel they are not getting a good deal if they pay at or over asking price. The answer is simple, anytime you can buy a property for less than reproduction cost, YOU ARE GETTING A GOOD DEAL. If you are in a multiple offer situation, do yourself a favor and offer over asking price. Ask yourself if you would rather lose a property over a few thousand dollars or secure a property and pay a few thousand dollars over the second highest bidder. Your realtor should be able to provide you with data that supports how well a property is priced and give you a recommended offer price. If you are using financing to purchase a property, paying 5,000 to 6,000 over asking price will make a difference of 30 to 40 dollars per month.

Bottom line is if you find a property that you like and it is priced well, don't think of asking price as a normal list price, think of it as an opening bid price. Bring a strong offer, or don't bring one at all. It will help reduce the frustration that many have felt.

-Wade E