How to Buy Foreclosures
Most people have heard of foreclosures, but don't know that buying one is relatively easy and usually profitable, if you start out with reasonable expectations. A foreclosure is when the Bank owns the property and the property no longer has a mortgage. Foreclosure, Bank owned property, and REO (real estate owned) basically all mean the same thing; the Bank has taken back the property and wants to sell it.
Not all Bank owned properties are bargains, but many are. Just like any other property, condition and location must be considered, along with the price of comparable properties in the neighborhood. Foreclosures tend to be under-priced, but this is not always the case. Popular properties can generate multiple offers and sell for more than the listed price. Do not get caught up in a bidding war and pay more than market value. Most foreclosures do not generate this kind of activity and can be purchased at a discount from the listed price.
Here are a few money saving tips to follow when purchasing foreclosures:
•1. Select a Buyers' Agent that has experience with foreclosures and the neighborhood you are interested in. Have your agent get the history of the property from a Title Company. Since most Banks have only one or two agents handle their foreclosures in an area, have your agent do a MLS search on this agent to determine the sales price to list price ratio. This will give you an idea on how much of a discount to ask for.
•2. Always offer less than asking price. This amount is based on how long the property has been for sale and the condition of the property. Low-balling a property when it first comes on the market is not going to work. A small discount has a much better chance of succeeding. Banks usually are not firm on their price because they are not in the business of being property managers. This is especially true if a listing is more than a few weeks old. A larger discount may be in order if this is the situation. Have your agent ask how many offers have been received on this property. The fewer the offers, the more of a discount you can ask for.
•3. Banks sell the homes "as is" and do not want to make repairs. This is not a hard and fast rule and may be waived on certain properties. Don't ask for any repairs until you have an inspection report in hand. Banks are generally exempt from most disclosure laws because they do not know the history of the property, but like everyone else, they are required to disclose any known "material facts". Ask the Listing Agent for a copy of any inspections that have been done on the property.
•4. Your offer should include a pre-approval letter and a Buyer biography. It is even better if you can get pre-approved from the same Bank's lending department. The stronger you present your offer, the easier it is for the Bank to accept it. Banks do not to start a transaction and then have it fail because of financing. Being able to prove that you have the ability to complete the transaction will tip the scales in your favor. Banks also may have certain forms they want included with your offer. These can be obtained from the Listing Agent and you should be aware of their significance to the transaction.
•5. Offers are usually faxed to the Bank. You do not have the opportunity to present the offer in person. Bank personnel do not work weekends or evenings, so be patient. Banks have many foreclosures and offers to work through, so do not be surprised if your dead-lines come and go. It often takes more than one person or department to approve offers. You can always extend the deal if you wish to proceed.
•6. Protect your earnest money. Some Banks make the earnest money non-refundable immediately upon the acceptance of your offer. Some Banks will not accept personal checks and require a cashiers' check or other certified funds. Since each Banks' policy differs, make sure you have a conversation with your agent about protecting your earnest money.
•7. Your offer should include an "inspection contingency". This will allow you enough time to get an inspection and terminate the deal if unanticipated defects are found. Now is the time to ask for repairs to be done or a credit applied to the purchase price. Banks may renegotiate to save the deal.
•8. An appraisal still needs to be done. This may take up to two weeks. The Bank paperwork may say that if the appraisal comes in low, the Buyer will make up the difference. Don't offer an unrealistic high price thinking that you can get the price reduced when the appraisal comes back. This is a risky strategy.
•9. You are not home free yet. The Bank may quibble over paying certain closing costs/fees. Ask the Listing Agent, before you write an offer, what fees the Bank is accustomed to paying. You also need to be aware that somewhere in all that paperwork from the Bank is a clause that in effect states that they can terminate the deal for any reason right up until closing. Fortunately, this rarely happens.
Buying a foreclosure home is not a "slam dunk" way to wealth as the late night infomercials tout. There are certainly bargains to be had in the foreclosure market. These tips will help manage your expectations and are a starting point in discussions with your real estate agent.
Tigard Home Sales Statistics for January 2011
single family homes
All information is deemed accurate, but is not guaranteed.
I expect short sales and foreclosures (Bank owned properties) to remain a significant portion of total sales in Tigard through 2011 and most of 2012. This will keep a downward pressure on sales prices. I am not expecting appreciation to return until at least 2013. The average median price being lower than last year indicates that the home sales are in the lower price ranges. Not many expensive homes are not selling right now.
Here are some recent articles I have written about the real estate market:
Money, Marriage, and the housing Crisis What has Happened to the American Dream?
Wayne Pruner is a Realtor in Tigard Oregon. I am ready to help you save money when you buy or sell your home. My direct phone number is 503-891-0795 and my email is waynepruner@oregonfirst.com.
Tigard Single Family Home Sales for December 2010
All information is deemed accurate, but is not guaranteed.
I expect short sales and foreclosures (Bank owned properties) to remain a significant portion of total sales in Tigard through 2011 and most of 2012. This will keep a downward pressure on sales prices. I am not expecting appreciation to return until at least 2013. The average median price being lower than last year indicates that the home sales are in the lower price ranges. Not many expensive homes are not selling right now.
Here are some recent articles I have written about the real estate market:
Money, Marriage, and the housing Crisis
What has Happened to the American Dream?
Wayne Pruner is a Realtor in Tigard Oregon. I am ready to help you save money when you buy or sell your home. My direct phone number is 503-891-0795 and my email is waynepruner@oregonfirst.com.
If this is a Buyer's Market, then where are the Buyers?
A Buyer's market is one that favors the Buyer. In normal times this means that there is more inventory than demand. The current abundance of very affordable homes for sale and the historically low interest rates would make this a buyer's market of colossal magnitude, but Buyer's are staying away when they should be crawling out of the woodwork to take advantage of the situation. In reality, sadly, this is a Buyer's market only because few have the ability to buy. Why is this happening?
•1. Lack of jobs. When people are afraid of losing their jobs or are working reduced hours, they are not thinking of buying a home. Obviously the already unemployed are not going to be buying homes. This is the number one issue.
•2. High lending standards. Financial institutions have swung from to loose lending standards to being overly strict. Denying mortgages has the consequence of reducing the pool of willing Buyers for their inventory of foreclosed homes.
•3. Lack of credit. This is not just relevant to the current recession. Most people are unaware of what actions negatively impact, or what actions improve their credit score. Managing your credit properly has lifetime benefits.
•4. Investors with cash. Short sales and foreclosures are approximately 30% of the homes for sale. Investors with cash can often get deep discounts because they offer a quick close. A Buyer that has to get a loan is often not a sure thing because of last minute financial, appraisal, and inspection issues.
•5. Condo issues. It is very difficult to get a loan on a condo if the Home Owner's Association has more that 15%of it's' owners behind on dues and it does not have enough reserves for future maintenance. Getting a loan when the owner-occupancy rate is below 75% is very difficult. Foreclosures and short sales in a complex magnify these issues and a Buyer needs lots of cash to make a purchase.
•6. Buyer confidence. Many people are sitting on the sidelines fearful to make a purchase because of all the negative housing news, primarily the threat of prices continuing to decline. Many Buyers are waiting for the market to hit the bottom before making a purchase, causing that day to be further extended into the future.
There is pent up demand for home ownership. Homeowners want to refinance to lower their monthly payments, freeing up money for other purchases. Financial institutions can help their own predicament by easing up on lending requirements. I also think that they should offer attractive financing or reduced closing costs to anyone who wants to purchase from their inventory. This would put them in the driver's seat for the whole transaction and increase their confidence that the deal will be done.
Tigard Home Sales for November 2010
single family homes
All information is deemed accurate, but is not guaranteed.
I expect short sales and foreclosures (Bank owned properties) to remain a significant portion of total sales in Tigard through 2011 and most of 2012. This will keep a downward pressure on sales prices. I am not expecting appreciation to return until at least 2013. The average median price being lower than last year indicates that the home sales are in the lower price ranges. Not many expensive homes are not selling right now.
Here are some recent articles I have written about the real estate market:
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Wayne B. Pruner is a Tigard, Oregon area Realtor who uses a professional and focused approach to help you sell or buy your home. He uses every available resource to maximize your financial return.
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