TIPS ON BUYING FORECLOSURES
The latest numbers show that foreclosures continue to increase in most U. S. metro areas – including those previously unaffected such as Houston and Chicago. Houston’s metro area jumped 26 percent over 2009. Chicago posted a 20 percent rise.
The driving force is no longer high prices and adjusting mortgages, but rather plain old economics – a down economy and the unemployment that goes with it.
Still 19 of the top 20 remain in just four states – California, Nevada, Arizona and our own Florida. Realty Trac – an organization which tracks and tabulates foreclosure activity - predicts another year of abnormally high foreclosures and repossessions and possibly more than that of 2010.
A few tips when trying to buy a foreclosure
1. Know the Difference. Short sales and bank-owned are both “foreclosure” properties. With a short sale, the seller is still the original borrower and is trying to sell the property for less than is owed. They are in the process of being foreclosed on. With a bank-owned property, also known as REO (for Real Estate Owned) – the lender actually owns the property and is the seller – the foreclosure process has been completed.
Short sales can take much longer to complete and are not guaranteed to ever close, or close at the contracted price. Most lenders will prioritize efforts to selling properties they already own.
2. Be ready and get pre-approved NOW. If you are going to finance, you will be required to show that you have your financing lined-up. If you are paying cash, you will have to provide “proof of funds” in the form of a statement showing you have the cash to close. If you wait until you find the property you want and then for a lender-approval, you may end up losing out. Without either of these you offer will not be considered no matter what the other terms are.
3. Use an experienced broker who has been through the process before. There are many factors to consider when making a short sale or lender-owned offer. Some lenders try to get a bidding-war going. Many short sale listing prices are artificially low to get the short sale process started. Your agent should be one who has been through the process and able to recognize and advise you on the pitfalls.
We've closed foreclosures - short sales and bank-owned - and we'd be happy to help you!