Before Buying a Foreclosure: 3 Things to Consider
Your buyers may be drawn to distressed properties. After all, “the No. 1 reason to buy a foreclosure is the potential for a good bargain,” says Daren Blomquist of RealtyTrac.com.
Indeed, discounts often can range from to 20 or 40 percent off on a short sale or foreclosure compared to a sales price of a nondistressed home.
But despite the big bargains, buyers need to tread carefully before jumping in. Blomquist provides some of the following tips in buying a foreclosure in a recent article at Business Insider.
–Beginners may want to focus on REOs. New buyers may want to avoid short sales, which often come with lengthy negotiations, or foreclosure auctions that often require all-cash payments. On the other hand, REOs, Blomquist says, can be similar to a traditional home sale in some ways and can offer some of the biggest bargains. “A bank isn’t emotionally attached to a REO; it’s just looking to recoup as much of its losses as possible,” Blomquist told Business Insider. “So the lender is often more willing to capitulate on price.”
–Don’t forget the inspection. Many distressed properties are sold “as is” and can come with a host of problems if buyers aren’t careful. Blomquist recommends getting a home inspector to inspect the home prior to any purchase. Buyers will then have a list of any potential problems with the home, along with estimates for costs of repair. Buyers can then use the list to possibly negotiate a lower price, Blomquist says.
–Don’t expect appreciation right away. You’ll also likely want to caution buyers who believe that because they’re buying at a big discount they expect to see appreciation right away. Educate your buyers about the market. “It’s important to not make the mistake of counting on any major price appreciation in the near term,” Blomquist advises buyers in the article at Business Insider. “We’re still in a depressed market, and we’re probably not going to see home prices appreciate much for quite some time.”