Tips for buying a foreclosed home
Other experts cited additional sources:
— Newspaper advertisements — Peter Souhleris, real estate investor, broker and co-founder of CityLight Homes who also starred in “Flipping Boston”
Don’t go alone
After identifying a home you want to buy, do your research and assemble a team, Valliere said.
“My recommendation would be to find the right people, before you even start the process,” said Young Lew, loan officer at Boston Mortgage Solutions. Lew, who is also president of Gaia Realty & Advisors and Gaia Management Inc., recommended finding an attorney to do a preliminary title search on the home to make sure there won’t be any impediments. for sale or surprises.
The title search should uncover any outstanding liens, Glasgow said.
Lee agreed, noting that as the buyer you would likely be responsible for paying liens, unpaid utility bills, etc.
“It’s very important when buying a foreclosed home to make sure you understand all the things you’re agreeing to in the purchase and sale agreement,” Glasgow said.
If you’re allowed into the home during the auction, you should bring a home inspector with you to help determine how much you’re willing to bid, Lee said.
Lew suggested bringing a licensed and insured contractor. Although the contractor may not be able to give an exact estimate for the work, you could glean valuable information about the condition of the house.
Bring a check
Don’t expect a standard bidding process. The procedure depends on what state you’re in, and each company often follows its own business models, experts said.
Despite these differences, you’ll likely need to bring a certified check for several thousand dollars to the auction in order to participate, Lew said. (It’s often $5,000, but it can vary by listing.)
Online auctions, however, may require a $5,000 deposit to bid, Seymour said, but it will be refunded if you don’t win.
Valliere suggested researching the price of a house of the same size in that area to determine what price to bid. She also recommended looking for ‘short sales’, which occur in the pre-foreclosure phase when current owners attempt to negotiate with the bank. In a short sale, the home is sold for less than is owed on the mortgage, Lee said. You can find short sales on Hubzu.com, Auction.com, and Foreclosure.com.
However, these can be difficult to buy in the region’s hypercompetitive market.
If you win, congratulations. Now let’s move on to financing.
Lew suggested taking out a rehab loan, which covers the cost of the house and renovations.
Financing options include loans from Fannie Mae, Veterans Affairs, and Freddie Mac, as well as a 203(k) from the Federal Housing Administration. Local lenders also offer loan products.
The real state of the house is added to the list of unknowns. Frequently, homes are auctioned “unseen,” Souhleris said. He suggested searching online for pictures of the house when it was last on the market and trying to determine how much damage it might have suffered.
“Make sure you have the reserve funds to fight the unknown,” Glasgow said, “and be patient.”
Seal the deal
The process of buying a foreclosed home can be complicated and time consuming. Foreclosure closings can be delayed for months, Glasgow said, given there are so many players, including but not limited to the former owner’s loaner, legal teams and the company of auction. “You have to understand that you’re probably getting a good deal, but there will be a lot of unknowns,” she said.
Buying a foreclosed home can also have an emotional impact. Sometimes the buyer can be responsible for evicting previous owners, which can lengthen the process, Lee said.
You may find yourself bidding in front of the house while the current owners are still inside.
“The hardest part for me, personally, is seeing this situation where a little kid is looking out the window and saying, ‘What’s going on, Dad? ‘” Souhleris said.
Although buying foreclosed homes can get very complicated, it can yield great results. “Go with the following mindset: ‘Hey, this might take a long time. I might not be able to get what I normally want, but I’m getting a good deal. This should be a plan to long term for fairness,” said Glasgow.