If you’ve ever shopped for a home, you’ve probably experienced the shock of seeing the price of a foreclosed house. How can that listing price possibly be correct? Compared to other listings you’ve seen, this one seems like the deal of a lifetime. While that could possibly be the case, the house’s actual situation could be a bit more complicated. And, regardless of the house itself, the transaction will likely be different than the normal homebuying experience. Here are five tips to consider if you're interested in buying a foreclosed home!
1. Find an agent who can help
Many lenders that own foreclosed properties work with a specific real estate agent or brokerage company to sell them. While you are browsing foreclosed listings, take note of the agent’s name or the brokerage company if one consistently shows up. Your best bet will be to reach out to this agent and work with them to find a property. Since this agent is working with the bank directly, they often will have insight to available foreclosed listings before they become publicly available.
2. Get preapproved
During the time that you’re considering real estate agents, you should also choose a lender and get preapproved. A good deal on a foreclosed property will usually move quickly, so coming prepared with a preapproval letter will help you snag the listing you have your eye on before somebody else does!
3. Familiarize yourself with comps
Even though the bank is motivated to sell these properties, there isn’t a standard way in which prices are decided upon. It’s in your best interest to study comparable sales, or comps, in the area to familiarize yourself with what a fair price would be. By doing so, you’ll know when a bank has listed a property at a low price, and can throw your offer in immediately. Or, if you see one priced too high, you can offer something lower but still competitive in the market.
4. Get an inspection
Having an inspection done on the property, even if the bank has already had one done previously, may save you a lot of headaches down the road. Since foreclosed properties sit unoccupied, sometimes for long stretches of time, the number of issues with the home could seemingly grow overnight. Paying for an inspection will prepare you for the problems you’ll have to deal with, rather than discovering them while you’re already in the thick of performing other repairs. While there’s no way to guarantee you’ll uncover every issue with a foreclosed home ahead of time, an inspection will certainly help.
Related Reading: 5 Home Inspection Problems to Avoid
5. Have trusted contractors ready
If you haven’t already picked up on the theme, preparation is key when going into a foreclosure transaction. This also means preparing for after you’ve closed, when you can dive right in to making the inevitable repairs. Start looking for contractors early and decide who you’d like to work with for any electrical, plumbing, or other repairs you’ll need completed. By having your list of contractors ready, you can schedule time with them to start evaluating and making repairs as soon as you’re ready.
Buying a foreclosed home definitely has its own set of challenges. While you may have to put more effort into this purchase than you would with a “normal” homebuying experience, you could potentially come out the other side with one of the best financial deals possible!