Foreclosed properties are normally sold at a very affordable rate than their actual market value.
According to Zillow, foreclosed properties are sold at 7.7% below their fair market value. This is why a lot of people tend to buy foreclosures rather than spend money for a new house.
While some don’t regard buying foreclosures as a viable option, there are those who see it as the best real estate investment available. If you belong to the latter, you might want to follow this guide on how to buy foreclosed properties.
- Check Before Buying
One of the main advantages of buying foreclosed properties is that they are currently vacant. This makes it easy and a lot faster to move in. However, it is due to such advantage that most home buyers make buying decisions on a whim. Moreover, these real estates are often sold in auctions and are mostly uninspected.
Before you buy foreclosures here, make sure you clarify your seller that you’ll only purchase the property if it has undergone a thorough inspection. It’s paramount to check for any issues that might be present, such as leaks, faulty wiring, or issues with the fixtures. Failure to do so will cause you to suffer from massive damages later on.
- Take Location into Account
A property’s location can greatly affect its value. Houses that are located in a busy area will often have a higher value than properties located in rural areas. Moreover, those that are located in a flood-free zone and have access to nearby facilities like schools, department stores, hospitals, and malls will have an even higher value.
- Prepare to Spend More
When you buy foreclosures for the first time, you need to know that having enough money in your pocket can help a lot. This is because the best foreclosures available near you can initiate bidding wars. If you want to acquire that property you’ve been vying for, you need to make an irresistible offer and prepare to pay for it. Down payments often have to be paid within 30 days, hence make sure you have enough cash to cover it.
- Be Preapproved for a Home Loan
By having an edge over your competitors, you need to get a better chance of acquiring that property you really want. One way you can do so is to get a home loan pre-approval and receive a letter of prequalification. By doing so, sellers will know that you are a creditworthy and serious buyer with a loan in your pocket. This will provide you with a negotiating leverage than the other buyers.
- Check Any Associated Fees and Taxes
Aside from the down payment and the property’s value, you should also consider checking any associated fees and taxes. For example, you should deal with the registration fee, notarial fee, transfer tax, and more. Condominiums will also require payment for monthly association dues.
Prepare in advance when you buy a foreclosure. Not only will it require a good deal of effort, it also entails having the right knowledge as well. Once you keep these in mind, acquiring a foreclosed property will become a lot easier.