A foreclosure list is an inventory of properties owned and possessed by the mortgagor after acquiring the same in auctions, default or through strict foreclosure from a mortgagor in default. In other words these are second hand properties for sale. Because of the 2008 housing meltdown, the effects of which is still being felt today, the foreclosure list of lenders, banks, realtors, etc. have certainly gotten longer. This article will provide a basic guide for buyers who are seriously considering buying a foreclosure property.
Foreclosure List: Buying Direct
A buyer who wants the ultimate bargain has to buy directly from the entity who owns the property. This way you do not pay the hefty fees of brokers and middlemen. Go directly to the lender/bank website and view the foreclosure list online, download the same or get a hard copy from a local branch of the lender nearest you. Stress the fact that you will only deal with an in-house agent or are only interested in direct buying.
Foreclosure List: Going in with a Broker
A real estate broker works for a fee, usually a portion of the purchase price or a minimum amount whichever is higher. The additional expense is an advantage for individuals who do not have the time, experience or inclination to search for the ideal foreclosure home themselves. In exchange for the additional expense, a buyer increases the chances of finding the ideal home, as opposed to settling for what he or she can find. Tip, be very specific with the broker, and insist on a “no find no fee basis”. Last but not the least, only make your final choice after personally scrutinizing the property, determining that the title is free from any liens, annotations, cloud (of title), etc.
Foreclosure List: Over and above the Purchase Price
Okay, so you found a great bargain on a foreclosure list, the price is low and the property is just what you are looking for. Before finalizing the purchase consider the following:
1. Factor in the amount needed to repair the property before you move in. Chances are if you do not do this now, you move in, find out the repairs are too much and end up defaulting an amortization or not being able to fix the house.
2. Factor in the necessary independent assessors: The lender or agency will make a great show of hiring an inspector who will give you the thumbs up on the condition of the property. However, chances are, they will do so with the barest of margins. When you move in an independent assessor will tell you that the place is not broke yet but it is about to be without a long list of necessary preventive repairs. Therefore always bring your own assessor for site inspections and be aware of the additional expense.
Foreclosure List: Bigger is not Always Better
The purchase price on a foreclosure list can be as low as half the purchase price for a new home, or even lower. So your lender will suggest that, since you can qualify for a bigger loan, why not go for a bigger property. Before agreeing to this, realize that the bigger the property the higher the real estate tax and the maintenance cost. Never buy exactly what you can pay or worst over extend yourself when buying from a foreclosure list, always leave a little room for miscellaneous expenses, emergency savings and unexpected necessary repairs.