Tips for Buying Foreclosures
February 11, 2010 – San Diego Foreclosures are at the top of every homebuyer’s wish list. With distressed banks trying to unload their assets at record rates, they have drastically cut home prices and put them on the market to sell, and to sell fast! The longer banks hold on to these assets, the more it costs them in upkeep, attorney fees, property taxes, insurance, utilities, etc.
Here are some helpful tips to buying foreclosures in San Diego’s recovering housing market.
1. Be patient!
With so many buyer’s competing for the best foreclosure bank owned bargains, many of these deals are getting bid up so high that they are no longer the bargain they appeared to be. It’s best to stick to a price you feel comfortable with and don’t let your emotions carry you into uncomfortable territory. There are more foreclosures on the way, and the right one for you may hit the market tomorrow or next week!
2. Get pre-approved with the same bank that owns the home
If you’re making an offer on a home owned by Wells Fargo, they may favor your offer over others if you pre-approve with them directly as well. This is a way for the seller to minimize the risk that you’ll come across third party lender issues, and they may be able to make some gains working on your loan as well. You can never be forced to use a certain lender so you can always change your mind and choose another lender.
3. Don’t be afraid of a fixer upper
Most banks sell their homes in “as-is” condition. They rarely want to get into the business of making repairs and other accommodations, as it’s not in their best interest to do so. That being said, they price the homes accordingly. Since fixer upper homes usually take more imagination and capital, there are fewer buyers competing for them, so you also have a better chance of getting your offer accepted. In most cases, the homes are priced far lower than it would take to bring them up to speed again. Unfortunately, many homeowners who are foreclosed on leave their homes in less than good conditions, and sometimes they trash the home. A buyer that can look beyond this can get a great deal by investing some time and effort in their new home.
4. Wait for the home to sit for a few days before making an offer
As I’m sure you’ve already noticed if you’re making offers in today’s market, foreclosures tend to have multiple offers within days of being listed. This is because the buying frenzy has created an environment of desperation. Some homebuyers have been trying for months to get their offers accepted, so now their strategy has turned to making offers on many more properties, many times without even looking at the homes in person yet. Tell your agent to talk to the listing agent or seller and try to get a good read of what the other offers may be like. By waiting a few days for the bulk of the offers to come in, you may get a competitive advantage by waiting for other buyers to show their cards first.
5. Preview homes with a contractor
Having a good contractor by your side when you’re touring properties can be very helpful. A contractor can tell you how big or small a problem is. Many times issues may appear more complex than they really are. Conversely, many times what may appear to be a minor issue may actually involve a lot more than expected. A good agent can help you leverage this information when you’re writing offers.
6. Keep your offers simple and clean
With so many offers on the table, banks much rather go with a simpler contract that doesn’t ask for dozens of little items or ones with lengthy contingency periods, complex addendums, and inconsistent requests. For the banks it’s all about the bottom line and a quick closing. Having an agent that’s well versed and experienced in bank owned foreclosures, also known as REOs, is crucial when you’re putting your offer together. Good agents know what a clean offer looks like, while at the same time protecting your interests.