Four Major Considerations When Buying a Foreclosed Property
Attempting to buy a foreclosed property for the first time can be a test of your time and patience. To assist in mitigating any future emotional meltdowns, I have put together a list of the four major things one should consider when buying a foreclosed property.
Whether to Occupy or Rent the Property
When buying a home in foreclosure, it is important to consider whether or not you are going to occupy or rent the property. Homeownership is not a business any bank wants to be in. Because the bank is looking to mitigate the risk of owning property again, you are more likely to have the first shot at purchasing the foreclosure if you are looking to occupy the home. That is not to say the bank would not sell to an investor. But if both parties came to the table with equal offers, the party willing to occupy would more likely prevail.
Do Come Prepared
A lot of people are under the impression that it takes a long time to complete a transaction on a foreclosure. This is actually not true as most banks will reply to an offer within a business week. So if you’re looking to buy a foreclosed property you better come to the table prepared by showing the bank you mean business. Get a pre-approval letter from your mortgage company or if looking to buy with cash bring proof of funds with your offer. Again, the bank wants the property off their books as soon as possible and is looking for proof that you are able to complete the transaction.
Type of Property
If you are considering a condominium property, there are special considerations you need to be aware of. First, you must know the percentage of rentals in the building. Most banks sell their loans to Fannie Mae or Freddie Mac. This involves bringing in contractors to provide the bank with estimates to have the work completed. Furthermore, the buyer needs to qualify for not only the home loan but for the construction costs as well. The 203K loan process can be very involved. So if you find yourself in this situation, I recommend that you consult with not only your realtor but a mortgage lender that specializes in these types of loans.
Next week, ORBA’s Jeff Newman will discuss exclusion of cancellation of debt income on foreclosure or short sale of residence. It sounds like a mouthful, but Jeff will break it down and help you to understand if you can take advantage of this exclusion.