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Foreclosures: Buying a Home for Less
While bank foreclosures do provide a rare opportunity to own a house for less, it could be useless investing your money in such a property with your eyes closed.
Sat, 10/02/2010 - 12:35 by Gauri Retarekar
Don’t ever let only the price tag rule your decision of buying a foreclosed house. It is imperative that you research the property and inspect it by personally visiting it before closing the deal.
Bank foreclosures are once in a life time opportunities, to buy homes at rock bottom prices. MT explores the nitty-gritty involved in owning a bank foreclosed property, worth every dollar you invest.
Foreclosures on a Rise
. In the first quarter of 2010, there were 930,000 foreclosure filings, an increase of 7 percent from the previous quarter and 16 percent from the first three months of 2009.
. The surge seems to indicate that homes that were in the foreclosure pipeline are now being lost for good.
. Observers of the housing scene see three distinct waves in foreclosures. The initial spike involved speculators who gave up property because of plunging real estate prices.
. The secondary shock centered on borrowers whose introductory interest rates expired and were reset higher.
. The third wave represents standard mortgages, known as prime, written to people who had decent credit ratings, but who have lost their jobs in the economic downturn and are facing the loss of homes they had considered safe.
A bank foreclosure is a property usurped by the bank from its owner primarily due to the latter’s inability to pay back a loan either in part or full.
The loan could either be taken to purchase the house itself or might involve the house as a mortgage.
However even after seizing the property, the bank do not realized the money due until the house is sold.
The bank are hence be in a hurry to make good the unrealized profit, and often accept an amount much lesser than the on-going property rates. And that is the reason; such properties are available dirt cheap.
Let’s take a look at the various aspects involved in owning such a property:
Advantages of Owning a Foreclosed Home
The biggest and the most apparent advantage of owning such a property is their minimal pricing, often 10 to 15 percent lower than the market rate. But, there are certain other advantages too, attached to owning such a property:
.These homes are open for inspection. While other types of foreclosures might restrict your ability to examine them before taking their actual possession, bank foreclosures allow prospective buyers to visit the property and closely inspect it to get a clear picture of what they are about to invest in.
.Since banks see foreclosed homes more as a liability, they are often ready to negotiate the terms and conditions of payments.
They might lower the amount of down payment and the applicable interest rate. You can also bargain on the overall cost of the house and if you are lucky you might be able to strike a deal at a much lower price.
.Such a property is often free of the burden of unpaid taxes or the worry of getting it evacuated from its former owners.
How to Locate a Foreclosure Property
The first step in owning a foreclosed home is that of locating one. Such houses are not readily available, so the best thing is to keep looking for one until it appears on sale.
You can approach various banks for listings on foreclosures. Property agents and brokers can also be of help in hunting for one.
You could also try searching for such properties on the internet or local newspapers, which carry advertisements funded by either banks or estate magazine owners.
Many government agencies such as the Department of Housing and Urban Development may also advertise for the sale of foreclosed homes.
For Investment or for Personal Use
Once you have located a property, you must decide whether you require it for personal use or as an investment that you will eventually resell, in the years to come.
Such a decision is important because it will help you decide if the house on sale is worth the money demanded.
Budgeting a Foreclosed Property
The fact that foreclosed properties are not easily available is perhaps good news in a way! You can utilize the time to build up your savings to pay for one when it does become available on the estate market.
Meanwhile you should research and find out the general range between which such a house should fall.
If you do not have the cash, you might have to consider getting a loan. The total amount that you will need should also be inclusive of the expenses to be incurred on repairs.
Also, consider how you intend paying back the loan if you do not get a tenant, if at all you plan to put it on rent.
But whether you are down-paying the entire amount or getting a loan, remember not to let the small price tag get in way of common sense while buying the house.
Research
Don’t ever let only the price tag rule your decision of buying a foreclosed house. It is imperative that you research the property and inspect it by personally visiting it before closing the deal.
This fact gains more relevance because such homes are obtained from people who were running low on money and hence its condition too is bound to have suffered.
Inspect the house and if need be get the advice of an expert to estimate the cost of repairing the house.
You should also survey the location and neighborhood of the house in question. These factors can go a long way in determining the worth of the house during resale.
Now that you know the basics of buying a foreclosed home, all that you can do is wait and watch for a foreclosed home to become available for sale.
