Learning how to buy foreclosed homes can be very rewarding as long as you know what to expect. There are really two sources for foreclosed homes: bank owned and government owned.
How To Find Foreclosed Homes For Sale
New Hampshire has seen many break-ins and theft of copper pipes and other items in vacant homes around the state. The Realtor’s multiple listing service has put an end to publicly displayed information stating whether or not a property is bank owned because thieves perceive those homes are vacant.
Hook up with an agent who is well versed in transactions involving bank owned homes. With your agent’s access to the MLS, you’ll be able to search for bank owned propertunities. Each seller has their own procedures and forms to purchase their properties. Your experienced agent will be able to gather the necessary forms and procedures required by each particular seller and help you write a winning offer.
7 Steps To Buy Foreclosed Homes
Step 1 is the same as any home purchase. Figure out how you will pay for it. If paying cash, you will need “proof of funds” from your savings institution. The “funds” must be liquid and readily available. A letter from the manager at your institution stating that you have enough money to buy the property is sufficient.
If you are financing your purchase, you will need a “mortgage pre-approval” certificate or letter from your lender stating that you are pre-approved for a mortgage with an amount high enough to match your offer. See your => 7 Best Finance Options
Step 2 is to hire a buyer agent who has experience at helping folks purchase foreclosed homes.
Step 3 You found one you like and want to make an offer. Offers must be in writing and contain your “proof of funds” or Mortgage pre-approval. An “earnest money deposit” will be required. Normally $1,000 is sufficient.
Step 4 The seller is a corporation and can’t be rushed…they just don’t have the manpower to review offers instantly. Usually, the turn around is 3-5 days for an answer. In some cases, you will be notified that there are other offers. They will then ask all bidders to re-submit their bids with their highest and best offers within a certain deadline.
Step 5 If you are lucky enough to be a successful bidder, you will have to agree to a list of conditions or addendums to your offer. Those items are usually meant to make sure that you understand that the property is being sold “as is” and that the seller has no knowledge of the “condition” of the property because they have never lived there. The rest of the addendums are meant to formalize the specifics of the offer and state that if there are any changes in the process that they be put into writing and ratified by both parties. The addendums will also state the time period allowed for you to complete your inspections of the property usually 10 days.
Step 6 Part I Due diligence is all on you and your agent. This isn’t any different in the case of a non-foreclosed home. The inspections you should perform will be to have the building evaluated by a licensed home inspector for any latent defects not readily visible. If there is a well or septic system with the property, those will want to be tested as well. It is recommended to make a trip to the town offices to look into the building file on record and see if any encumbrances or easements are on record. Look for the original building permit and any subsequent permits for alterations to the building and to see that those alterations have been inspected by code enforcement.
In the case of defects or other problems with the property, you will have to decide whether or not you can live with them. The sellers won’t be willing to make any repairs so don’t even ask. If the problems with the property are too much for you to deal with, ask for a release of contract and get your earnest money deposit returned.
Step 6 Part II In the case of problems with the property, all is not lost. If you are financing, please understand that the home has to qualify for the mortgage as well as the buyer. You have the option of using a fantastic program offered by the Federal Housing Administration called the FHA 203K rehab loan. This loan product allows you to get money added to the mortgage to handle repairs or updates and even additions. The beauty of the program is only 3.5% down payment is necessary.
Step 7 If you are satisfied with your inspections, it will be up to you, your agent, and your lender to finalize your financing and get to closing.