Things You'll Need:
- CASH or Pre-Approval
- An Attorney or Realtor
- Clean Credit
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Step 1
Before searching for and finding the perfect property, you must get your financing in order! Pull a free credit report, visit with a lender or consider cashing in equities or investments.
CASH is king in Real Estate. At the very least you should plan to have 25% of the sale price in CASH. Most of the ZERO DOWN programs are SCAMS.... get real and get your cash ready. -
Step 2
Once your financing is in order... it's time to find a foreclosure. They are pretty easy to spot. Most foreclosures will have long grass, little maintenance and have fallen into disrepair, but not all.
The best way to find out what's going into foreclosure, besides driving around, is to ask a Realtor.
BEWARE, Realtors are in SALES. Interview several and find one you trust. Their job is to find you a house. NOT to SELL you a house.
They work on commission, so don't let them push you into a decision. On the other hand, don't take their insistence on a particular house as "SELLING". Realtors are professionals and their advise is valuable. Ultimately, it's up to you to decide what's best for YOU! -
Step 3
Once you find a good candidate, do your research. Find out what the house sold for new. How long ago? What has been done over the years if it's an older home. Assess the surrounding homes, gather data on demographics, home values, schools, etc.
Finally, what are you going to do with this home? Do you plan to fix and flip? Or will this be your primary home? Do you plan to rent it out?
These are all factors in your decision.
Crunch the numbers and decide what the home is worth to YOU. Add or subtract what you think it might sell for and formulate a strategy. Time is of the essence, make informed decisions but be quick! -
Step 4
Once it's time to make an offer, sit down with you attorney or Realtor. What makes sense? You never go in with pure emotion, this is a business decision. Regardless of WHAT you plan to do with this property, it's JUST BUSINESS. Check your emotions at the door.
Make sure that your Attorney or Realtor has experience with REO's... otherwise your chances of actually getting the house are slim.
Banks don't act like regular sellers... they have ZERO emotion. It's "Business" to them. To sum it up... the person in charge doesn't really care anymore than the cashier checking out your groceries cares how you eat.
The bank wants the house off the books and if you are lucky, the Bank representative will have some experience.
Prepare to have your offer turned down. Make sure you have a back-up strategy and a back up property.
As always remember, Bank Owned Properties are sold AS IS. No repairs, rats, mold, and other problems are yours once the title conveys. -
Step 5
Upon a successful contract (mutual acceptance).. you will likely part with 1% earnest money but up to 5%. Kiss that money goodbye if the deal falls through, you might get it back, you might not. Remember, it's all business. Make sure you know what you are getting into or stay away from Foreclosures.
Make sure you trust your Realtor or Attorney and Lender if there is one. Trust in their experience and professionalism. They could make or break your deal, so choose wisely!
Also be prepared for Seller directed Escrow and Bank Addenda. The bank WILL stack odds in their favor, up to and including $$$ Per Diem' s if you extend closing. Be aware of the situation and don't make extensions an option.
While you are waiting for closing, prepare contractors and other logistics. The process goes fast most of the time, especially once the property is on the banks books. If you offer with 30 days to close, expect 10 days before the bank says that you have mutual.... that leaves 20 days or less to FUND. Also BEWARE the Cloudy Title. make sure a preliminary is available at the time of your offer (although unlikely). -
Step 6
Upon a successful closing, it is advisable to turn on utilities as soon as possible to check for damage and avoid deposits. Most states require the seller to convey clear title, BEWARE.
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Step 7
In conclusion, consider buying from a regular old traditional seller. They will allow inspections, make repairs and generally be happy to find a seller. Often, especially in a down market, sellers will make HUGE concessions. Just a thought.
Comments
cincin1 said
on 9/1/2009 Great articles, with detailed information. 5*
hairandart said
on 7/29/2009 Thanks. This was full of lots of great info...
hi2ufrmdeb said
on 4/2/2009 Lots of things to think about. I'm in the process now. Thanks for the info.