Tips For Buying Foreclosures

I came across a short article this morning which included the following good tips for anyone considering buying a foreclosed property.  While they came from an agent in Florida, the principals apply in any market, and I really thought they were worth sharing here too.
(My own comments follow the tips in red.)

1. Work with an agent who has access to foreclosure information and knows the process.

• Many home buyers assume that all agents have access to foreclosure listings. It's important to ask.
• Most banks will list their homes with agents on the MLS for the greatest possible exposure on the listing, and of course any good agent will have access to the MLS.  What you want to make sure you're getting are daily automated emails showing you only the listings which fit your buying criteria.  For example I can set you up with a personalized search in the MLS to email you when any listing for a 1400 - 1600 sq/ft, single level, foreclosed home in Gilbert, Arizona is put on the market.  The variables are nearly endless.

2. Bank-owned properties generally close faster than short sales. 

• While short sales can be bargains, they also can take a lot longer. Some banks will negotiate in a timely manner on short sales, but most will prioritize properties they have already repossessed. 
• In truth, most banks have entirely separate departments for handling the disposition of their foreclosed assets.  A foreclosed property is treated like a home owned free & clear by the bank, it requires no additional review of owner financials, investor or mortgage insurance provider reviews, second mortgage sign off etc etc.  A bank can close escrow on a a foreclosure sale just as soon as you can.  In fact most banks want to see a closing timeline of no more than 15 days for cash purchases, 30 for conventional financing, and 45 for FHA financing on a transaction.

3. Don't be afraid to offer less than the asking price. 

• Don't assume that banks are firm on their price. For example, asset managers responsible for liquidating bank-owned Chandler, Arizona condos are often willing to consider a lower offer. 
• Before listing a foreclosed home for sale, most banks get 2 or 3 separate opinions of fair market value from agents and/or appraisers.  So when they set a list price for a property, they are taking into account the fair market value, property condition & repair needs, and the types of financing & seller concession requests they might encounter from buyers.  They have margins they are instructed to work within, but EVERYTHING IS NEGOTIABLE.

4. Ask the bank to pay your closing costs. 

• The worst that can happen is that they say no. Sometimes buyers are surprised to find that banks can be quite accommodating when they want to.
• This goes back to my previous point that EVERYTHING IS NEGOTIABLE.  Just be sure you've spoken to your lender before making an offer that requests closing cost assistance from the seller, to make sure you know the guidelines & allowances for such verbiage in a contract on the type of loan your applying for.

5. Get pre-approved from the right bank. 

• When making an offer on a short sale, it's often strategically helpful to be pre-approved by the same bank. During negotiations, this may tip the scales in your favor.
• While this is true to some extent and some banks are requiring at least a pre-approval be provided by one of their branches on any buyer making an offer on their listings, it's not mandatory that you use the lender who is selling the property to obtain your mortgage.  What's more important is finding a lender whom you trust and believe will give you the best service & loan products available.

Buying any home, foreclosed or otherwise, is a big deal.  You want to make sure you're represented by a real estate professional who knows what they are doing, and has your best interest in mind.  I pride myself on knowing my business well and educating my clients so that they aren't being lead blindly through a transaction, but rather they understand every step of the process and can make informed decisions.  If you or someone you know is interested in buying or selling a home in the Phoenix metropolitan area, please call me, I want to help.