Buying a foreclosure can be an excellent way to save money on a new home or on an investment property. Still, whether shopping for Colorado luxury condos or a sprawling home in Tampa Bay, before you decide to purchase a foreclosure there are several things that you need to keep in mind.
The Inspection Process can be Tricky
When purchasing real estate, most homebuyers chose to have the property inspected by a professional. This way, they can be sure they are aware of any problems with the property and they can make sure these issues are addressed before actually purchasing the home. With a foreclosure, however, an inspection may not be an option. In fact, some foreclosures are not open to inspection at all. In this case, you will have to make your decision based solely on the information that is contained in the listing. Furthermore, even if you are permitted to complete an inspection, you will not have the option to have repairs made before you purchase. Rather, you will have to calculate the cost of the necessary repairs when determining how much you are willing to pay for the property.
If you are unable to complete an inspection, there are a few guidelines that will help you determine if the home will make a worthwhile investment or will become a money pit. First, keep in mind that homes built before 1978 may contain lead paint. Second, consider the current market value of other homes in the neighborhood. This way, you can determine a reasonable resale value after you have completed any necessary repairs.
Financing Procedures Differ
Obtaining financing for a foreclosure is different from financing a traditional property. If you will require financing for your purchase, you will need to check with the lender before you place a bid on the foreclosure. In fact, in many cases, you will need to be able to hand over the cash almost immediately after winning the bid.
Several Types of Foreclosures are Available
Many people who are interested in purchasing a foreclosure are unaware that there are actually several different types of foreclosures available to select from. The most familiar type of foreclosure is the REO, or real estate owned, foreclosure. With an REO foreclosure, the owner has defaulted on a traditional loan and the bank has regained ownership of the property. Since an REO foreclosure may involve any number of different banks, lenders and trusts, the procedures for purchasing an REO foreclosure may vary significantly.
In addition to the REO foreclosure, VA and FHA foreclosures are also available. With these types of foreclosures, the owner took out a loan through either the Department of Veterans Affairs or through the U.S. Department of Housing and Urban Development. Since the government regains ownership of the property in both of these types of foreclosures, there is a very specific process that must be followed in order to purchase a VA or FHA foreclosure. Therefore, it is best to contact a real estate agent to help with this process.
About The Author – Brian Kinkade works with homebuyers within the Denver luxury condo market, including Art House Condos Denver, and is a licensed real estate agent with The Home Cart team. This guest post is brought to you by the Clearwater Real Estate team; hope you find it informative.