With so many foreclosed homes on the market today, it’s a great opportunity for first-time homebuyers and investors, alike, to get a good deal on a real estate investment. When the mortgage rates are low, it’s an even better time to purchase property and depending on the real estate market that you desire to buy property in, you may be able to get just the deal that you are looking for.
Real Estate Investment
To purchase a foreclosed home, you will need an experienced and licensed real estate broker or agent, earnest money, proof of funds or a pre-approval letter and a down payment, if required. However, according to the article, “The Safest Ways to Buy Foreclosures,” posted by Bankrate.com at the MSN Money website, if you have good credit, many banks will loan you the full price of a foreclosure property. The earnest money that's required represents your good faith or sincerity in the purchase of the property and a pre-approval letter for a mortgage loan will typically suffice as proof that you are qualified to purchase the property.
Buying Foreclosure Real Estate
The following steps will help you in your endeavor to purchase foreclosure real estate property:
- The first thing that you should do is choose a lender or a bank to get pre-qualified or pre-approved for a mortgage loan. You can either go into the bank to apply or apply online at a reputable mortgage lending company. As long as you qualify for a loan having the required credit standing and credit scores, your lender will then provide you with a pre-approval letter to give to your real estate agent. It is important to note that a pre-approval letter does not absolutely guarantee that you will get a home loan. This is because in the home buying process, unexpected incidents can occur to hinder the process. Nevertheless, many foreclosure companies such as Fannie Mae will not even consider your offer on the home unless you provide the company with a pre-approval letter to let them know that you are eligible and qualified to purchase the property. You can also prove that you have the funds by providing them with a statement from your bank.
- Choose a licensed real estate broker or agent who is experienced in selling foreclosed homes. Your real estate agent will show you several foreclosed homes according to your criteria. You must understand that most foreclosures are sold as an “as is” deal.
- Once you have decided on the property that you would like to purchase, you should have an inspection performed, which you will be required to pay for whether you complete the purchase of the real estate property or not. Hiring inspectors might include not only home inspectors but also inspectors who will inspect the property for pest, structural and environmental problems, as well as for mold.
- If you are satisfied with your inspection and you are ready to proceed with an offer, your real estate agent will fill out the contract according to the offer that you want to make. He or she will help you to decide on a reasonable but good offer for you.
- At the time of the offer, give the real estate agent the earnest money to submit with the contract offer. It will be held in an escrow account until closing. Your earnest money is usually $1000, however, sometimes more is required. If your deal is a cash one, your earnest money requirement may be at least 10 percent of the purchase price of the real estate property.
- Hire an attorney. Your attorney will make sure that there are no additional liens or judgments attached to the real estate property as well as represent you at your closing to make sure that all paperwork is accurate.
- Look over your contract. The foreclosure addendum that is added to the real estate contract may include a requirement for you to pay a “per diem” charge or a fee for each day thereafter that you do not close on the designated or original closing date. The fee is generally $100 per day. However, some foreclosure companies are no longer charging a per diem. If you do have a per diem clause in your contract, you should inform your lender and attorney from the very beginning of the buying process of how important it is for you to close on time.
Claudette Pendleton - Claudette Pendleton is a freelance writer and real estate agent. She is, also, a self-taught credit restoration consultant. Since nine ...
Join the Conversation