Questions About Purchasing a Foreclosure
Buying foreclosed property is often touted as a way to get property for little to nothing, but the reality is that foreclosures are rarely dirt cheap, and when they are, the money you saved is often poured back into the property. However, if you know what to look for in foreclosed properties and how to go about purchasing one, you may find the property you're looking for.
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How Much Will I Pay?
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One of the biggest misconceptions that buyers have about foreclosures is that all foreclosed properties can be had for pennies on the dollars. That's simply not so, say's Bankrate's Holden Lewis.
"Just as with any other real-estate purchase, you have to look at the recent sales prices of comparable properties, or 'comps,'" advises Lewis.
Newly foreclosed properties, or properties that have been well-maintained by the owner or lender may not differ much in price from other real estate in the area.
The exception is foreclosures that have been empty for months or years, or those in bad condition. While these properties can be bought for less, the cost to renovate them may eat up any savings.
How Easy is Financing?
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Another misconception that many potential foreclosure purchasers have is that the lender will make financing the foreclosure part of the deal. The truth is, you should have financing ready before you begin looking for a foreclosed property, or any property for that matter.
It's a good idea to have a preapproval letter from a lender before you even talk to a bank or Realtor who deals in foreclosures. Presenting a preapproval letter will make the lender or Realtor take your offer more seriously.
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What Should I Look Out For?
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If a foreclosure price seems too good to be true, it probably is. Those who know they are going to lose their property to foreclosure see little value in maintaining the property, and the financial problems that drove them to foreclosure may have rendered them unable to replace or maintain expensive items such as HVAC systems, roofs or plumbing.
Don't even think about purchasing a foreclosed property without having a licensed home inspector check the property out from top to bottom. A foreclosed property is not a good deal if it needs expensive repairs, and since most foreclosed homes are sold as-is, you'll have little recourse if problems crop up after you've made the purchase.
Where Do I Find Foreclosures?
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If you're interested in a foreclosed home, do a web search for listings of foreclosed properties by state or city, or contact local Realtors to ask what properties they are currently showing that are foreclosures. Those who live in small markets may want to contact local lenders to ask if they have any foreclosed homes for sale.
Sometimes, foreclosures find you, in the form of abandoned homes or other properties that crop up in your neighborhood. If you can't find out who owns the property by asking around, searching for the deed at the local courthouse can help you determine who owns the property.
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