What is a Foreclosure?
A foreclosure occurs when the owner defaults on their mortgage due to the fact they were unable or unwilling to pay the mortgage. The bank then takes possession of the home and lists them at discounted prices. These properties are referred to as bank-owned or real estate-owned (REO). Before a bank hangs a “For Sale” sign, all the existing debts and taxes are paid off, and in many cases, repairs are made to bring the home to the standards of the neighborhood. Banks are not structured to own property in great quantity, so foreclosed properties are considered assets in distress. In our real estate market today there are currently thousands of foreclosed homes and it is expected that more than a million foreclosed and distressed properties are going to hit the market nationwide before the end of 2009.
Why purchase a Foreclosure?
There are many advantages to purchasing a foreclosure. Although they may be difficult--both to locate and to execute--the potential to either turn them over for a nice profit or find a good deal on a home is definitely there. Since a bank or other lender wants to recover as much of its investment as quickly as possible, foreclosed homes are often unloaded at significant discounts—sometimes as much as 30 percent or more. This, however, does not mean that submitting a VERY low offer will result in an accepted contract. Most bank owned properties are now selling at or above listed price. Best of all, you should be able to buy a bank-owned property with a traditional mortgage.
Why choose My Arizona Home Team?
Potential buyers should not gamble when buying a foreclosed property. It is important that you find an agent that is experienced in foreclosures. In certain cases there are sellers who won’t accept offers from unrepresented buyers. Our Real Estate Consultants ensure that purchasing a foreclosure is an easy process and give you peace of mind. With our extensive background and access to current foreclosures and pre-foreclosures, you can expect the best source of information which allows you to move quickly when a home becomes available.
Why avoid auctions?
While there are a number of safe ways to buy a foreclosed property, bidding on one at a court auction isn't one of them. That's because you're buying a home sight unseen and without an inspection. You'll have no idea whether the home needs repairs and what those repairs might cost. Some of these properties also owe back taxes which can require extensive research on the buyer’s part. And finally, in most cases, you'll need to pay cash for the home. These are just a few reasons why the safest way to buy a foreclosed home is to wait until the bank has put it back on the real estate market.
Is buying a foreclosure the best deal?
You don’t want to pay more than the appraised value, based on the condition and location of the property. The goal in buying a foreclosed property is to buy at a low cost so that you can quickly begin building equity. The key is to decide what the offer ought to be. My Arizona Home Team will check nearby or comparable homes to see if the asking price for a foreclosed home is, in fact, a bargain. In addition, it is important to remember that when the bank takes ownership of the foreclosed property, you know there are not any taxes or liens to contend with and that the home is empty of homeowners. Bear in mind that the competition for foreclosed properties is aggressive and having good realtor guidance is a must.
What are the risks?
Some foreclosures --unlike fixer-uppers-- are in fairly good shape, while others may be way behind in maintenance from sitting empty for an extended period of time that could be quite costly to remedy. Many foreclosures happen in waves, with entire neighborhoods entering into the process. As banks rarely have the time or staff to monitor the condition of their foreclosed properties, many of these buildings end up as temporary shelter for vagrants and other transients. It’s best to hire a professional inspector to determine the property’s condition. Keep in mind, even if the inspection is included as part of the sales agreement, the buyer still pays for it. You should also be prepared to deal with more paperwork with a foreclosure than you would with a conventional purchase, particularly when a government agency is involved.
