Whether you buy a home through a traditional real estate sale or look for a foreclosure sale, your financing options and the costs involved in the homebuying process are factors to consider. The considerations of bidding are similar, regardless of whether you are buying a foreclosure at auction, a home offered by the Department of Housing and Urban Development, or a lender-owned property — often referred to as real-estate-owned, or REO — but the laws that govern the bidding process vary by state.
Standard Real Estate Transactions Are Common
When buying a home in a standard real estate transaction, have the home inspected before putting in a bid. Find out whether similar homes in the neighborhood that sold within the last six months sold above or below list price. The seller also might be willing to accept a lower bid if the home has been on the market for a while and he has already moved out. Once you decide on an opening offer, have your buyer’s agent present a written bid to the seller’s agent. Include any contingencies and a lender’s mortgage preapproval letter with your offer. Waiving inspections, asking for fewer contingencies, or making a cash offer can sometimes get your bid accepted even if your offer isn’t the highest.
Lender-Owned Homes Go Quickly
Real-estate-owned properties are homes that go back to the mortgage lender if a foreclosure auction fails to receive bids. Ask a real estate agent for a comparative market analysis that includes current sales prices and recent sold prices on similar REO homes located within one to two miles of the home you want to buy. REOs are sold in “as is” condition, so not all lenders consider financed offers. Once you have an idea of the home’s value, you can make an offer to the lender’s listing agent.
HUD Homes Offer Deals
HUD offers homes for sale that it acquires when homeowners lose their homes through foreclosures on mortgage loans insured by the Federal Housing Administration. Before you make a bid, hire a certified home inspector to inspect the property. When you decide how much you want to offer, contact a HUD-approved real estate broker in your state to submit a bid for you during the offer period. HUD usually accepts the highest bid. If you don’t have the cash to bid on a HUD home, you must obtain financing through a mortgage lender by qualifying for a loan. HUD homes are sold in “as is” condition, and one of its homes must meet certain FHA inspection guidelines to qualify for an FHA-insured mortgage loan.
Real Estate Auction Process Varies
Whether a home sells at auction because of foreclosure or because the seller wants a quick sale, you need to familiarize yourself with the auction process. Bidding procedures vary by state so you need to know the requirements for a foreclosure or tax lien sale beforehand. Generally, if you do not have the cash to pay for the property at the auction, you must bring a cashier’s check to make an earnest deposit of at least 10 percent of the home’s listing price. If you intend to finance the purchase, a lender must pre-qualify you before the auction. You can find out how much a home is worth by getting a free property value analysis from a local real estate agent.
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How to Determine How Much to Offer on a Home for Sale
The right purchase price is based on a variety of market conditions, how much you can afford, and strategic considerations.