Five Rules for Buying a Local Foreclosure or Short Sale
Five Rules for Buying a Foreclosure or Short Sale
Buyers are still clamoring for real estate deals in this market. Foreclosures and short sales offer some of the best bargains, but also have a higher risk level. Still, more than four in five adults think foreclosures and short sales can be good deals, according to a recent American Society of Home Inspectors (ASHI) survey.
Some analysts say the rebound has begun and home prices may rise by the end of 2012. This means now may be buyers' last chance to take advantage of affordable properties and low interest rates. If you want to score a bargain before the housing market recovers, you'll need to follow a few rules to invest with certainty.
Make a wise investment by adhering to these five rules while shopping distressed properties:
Rule 1: Position yourself for success
Before starting your search, get preapproved for a mortgage so when a good deal presents itself, you're positioned to submit a bid right away to be the first offer on the bank's desk. Work with an experienced real estate agent who can help guide you through the daunting sea of foreclosures and short sales. Bidding can be complicated and time-consuming, especially when working with a home sale needing bank approval. A good agent will know how to navigate through the paperwork and red tape.
Rule 2: Do your research
Are there any undisclosed liens on the property? Is the seller behind on his property taxes? What permit records does the city have on file? This information will be critical during decision-making. Work with your agent to ensure the contract requires any delinquent taxes, liens or assessments will be paid prior to you taking ownership of the property.
Rule 3: Always get a home inspection
Eighty-four percent of adults surveyed by ASHI said they would be more likely to purchase a distressed property after a home inspection has determined its condition.
A home inspection gives you the confidence to move forward with your purchase because you'll have as much knowledge as possible about the condition of the property. An inspector will visually examine the condition of the home's roof, attic and insulation, foundation, basement and structural components, as well as interior plumbing and electrical systems. Be sure to find an ASHI-Certified Inspector (ACI) to ensure your inspector is experienced, as many states have minimal licensing requirements. To find a local ACI, use ASHI's "Find an Inspector" tool on www.ASHI.org.
Rule 4: Budget for repairs
When looking at short sales and foreclosures, remember price is only one aspect to consider. A home will almost always require some type of repair. After receiving your inspection report, you can estimate costs associated with necessary repairs, maintenance or energy-efficient improvements.
Rule 5: Assess the neighborhood
Location should be a top consideration when purchasing real estate, and in a tough housing market, it's even more important. A home has limited worth if it's located in a less desirable neighborhood. High foreclosure rates can turn a once-desirable neighborhood into one many might likely avoid. These locations are likely to see a slower recovery than more populated or favorable areas less affected by the economy. Make location as important as price when making a purchase decision.
Protect yourself with knowledge and expert advice to make a confident, smart decision about your largest investment.