What You Need To Know About Buying A Foreclosed Home
As a quick refresher, a HUD home is a foreclosed home that was previously financed by a government-backed home loan. However, most foreclosed homes on the market are bank-owned, not government-owned.
In some ways, the process of buying a foreclosed home is similar to other home purchases. For instance, you’ll want to know a few things before you start home shopping, like where your credit stands and how much home you can afford. Our office can easily help you with those details.
You’ll also want to partner up with a savvy realtor who can negotiate a great deal on your behalf. Call our office for local recommendations.
Steps to Buying a Foreclosed Home
Step One: Get Pre-Approved
Foreclosed homes, sometimes called REO which is short for “real estate owned,” are bank-owned. However, the same bank will not be one financing your loan. You’ll need to apply for and get pre-qualified for a home loan from another lender. Having a pre-approval letter is absolutely the first step to buying a foreclosed home. Bank-owned properties don’t sit on the market for long. As soon as the bank gets a reasonable offer from a pre-approved home-buying hopeful, the bank will accept it.
Start your home loan application online today! Click on the link at the top of the page to get started.
Step Two: Work With a Knowledgeable Agent
The first step is getting pre-approved for a loan with terms that fit your budget. The next step is to find a home to bid on! Working with an agent is your best tool for searching current foreclosed home listings. Although any agent will have access to listings, you’ll want to work with one that you feel comfortable with and already has experience with foreclosed homes. Please contact our office for trusted referrals!
Step Three: Understand That Foreclosed Homes Are Sold As-Is
Most home sales require an inspection as part of the sale or terms of the loan; however, this may not be the case with a foreclosed-home purchase. Because foreclosed properties are sold as-is, you’ll need to take responsibility for getting an inspection. While you won’t be able to negotiate repairs as part of the sale, you will at least know the condition of the home. Consider the repairs that are needed in your final cost and see if the deal adds up!
Check the landscaping, too!
Remember to have you inspector look at the landscaping of the home. Foreclosed homes are often vacant, and a vacant home deteriorates a lot faster than an occupied one. This is especially true in places of extreme weather where pipes are prone to freezing or in flood areas.
Step Four: Review Your Home-Buying Budget
Assume that all foreclosed homes need some restoration to them. You may be able to take care of some of the little repairs, but others will need a professional’s touch. Remember to get an inspection and apply for a home loan early. That way you will have a better idea of how much your foreclosed home will actually cost and determine whether to bid or pass to the next one.
Step Five: Search Comparable Home Prices
A comparable house is one that’s in the same neighborhood, about the same size, but not listed as a foreclosure. Knowing this information will give you an idea of the actual market value of the foreclosed home you're considering. Use this information along with the cost of repairs to determine if it’s a good deal for you.
If it’s not, it’s ok! Foreclosure listings, including HUD homes, are frequently updated. All you need to do now is get pre-approved for a home loan, and you’ll be ready when the right house goes on the market.