In this market, everyone is looking for a deal on real estate. One of the best ways to go about doing this is by purchasing a repossessed, or foreclosed, property. Many banks and government entities have a plethora of these types of properties on their books and would love to sell them to a qualified borrower. Through diligent preplanning and research, you too can purchase a repossessed home.
- Skill level:
- Moderately Easy
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Before you start the process, check your credit score. Make sure there are no errors on it and that your score is as high as it can be. This will not only help to make your mortgage approval process smoother, but it can also save you money in the long run. The higher your credit score, the lower your interest rate.
First, make an appointment with a mortgage lender. Fill out a mortgage application and get a pre-approval letter. This letter states how much the bank is willing to lend you, in the event of a home purchase. This is not a binding letter, but it does give you a good idea as to what price range you should be researching.
Find a realtor to help you with your search. Call all the banks in your area for their foreclosure listings. Search the paper and local real estate guides for foreclosure advertisements. Call your local city and county government to ask for their listing of properties that are about to be sold on the courthouse steps for overdue taxes--this is public information and should be given to you at no cost.
Go through the listings to find foreclosed properties in your price range. Look up the tax value on the homes through your local government's Geographical Information System to see if the foreclosed price is a deal compared to the tax value. If it is not, you may want to take that into consideration before you make an offer.
Once you find two or three that you are interested in, see if your realtor can get you a tour of the property. You may or may not be able to see the property prior to making an offer or buying it at auction. If this concerns you, do not purchase the property.
Go through your realtor to make an offer on your favourite listing. Include your pre-qualification letter into the contract. Remember to offer an amount lower than the list price, perhaps starting at 20 per cent below the list price to see if you can negotiate the price even lower. You will more than likely receive a counteroffer for a higher amount, but it will likely still be lower than the list price. Negotiation is where you can save some real money in the process. Your realtor will be a great help in this process, giving you a good number to start your negotiations and counteroffers.
Tips and warnings
- Do not go out of your price range--you do not want to end up in the same situation as the person who lost their home.
- If the property is owned by a very large banking institution, it may be weeks or months before you receive a response to your offer. Be patient. If it is meant to happen, it will.
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