Buying a foreclosed property can be exciting and profitable. Whether you’re hoping to get a bargain price on a home for yourself or for your growing investment portfolio, foreclosures are worth considering as part of your strategy.
Here are some of the ins-and-outs of buying foreclosed homes for sale in Orlando that you should keep in mind:
- Most foreclosed homes involve purchasing the property directly from the bank or other lender. Sometimes referred to as an REO (“real estate owned”) property, the process is basically the same as a traditional home sale — except that you’re negotiating with the bank-as-seller instead of a homeowner. As your agent, The Property Source would be responsible for entering into those negotiations with the lender.
Depending on how long the home has been on the market and several other factors, the lender may be motivated to sell quickly and might offer perks like lower interest rates on your mortgage if you finance through their institution. On the other hand, some REO properties are owned by large banks that aren’t as likely to move the process forward quickly, so your anticipated timeframe from offer to closing may be longer than a traditional sale.
- Some bank-owned properties are sold at auction, not through the traditional home-selling process. These auctions happen as you’d expect: the bank sets a minimum bid price — typically the amount still owed on the previous owner’s mortgage — and if you enter the highest bid, you’ve won the auction. There may be additional terms and conditions of the auction, set by the lender or even the county where the property is located, so you’ll need to be sure to read all of the fine print.
The drawbacks? Most foreclosed homes sold at auction are not only sold in “as-is” condition, but also they often don’t have any provisions for an inspection or even a look inside the house prior to bidding. Foreclosed homes are at a higher risk for vandalism and damage (either by the previous owners or by trespassers once the home became vacant), so there’s a significant chance that your new home will require repairs, replacement of appliances, and so on.
Also, many auctions require immediate payment when you win, so if you don’t have your funding already secured, you’ll have to forfeit the bid.
- One strategy for avoiding many of the aforementioned problems is buying a home that is in pre-foreclosure. Property owners who have received a foreclosure notice are often extremely motivated to sell their homes quickly and for less money than the going market value. Of course, in order to not be classified as a short sale, your offer should be at or above the amount they currently owe on their mortgage — an amount that the seller is not likely to openly disclose.
Buying a pre-foreclosed house gives you the advantage of touring the home prior to making an offer and having a professional inspection done between offer acceptance and closing, and also having a more predictable schedule for getting to the closing date.
Strategies from the Real Estate Experts
At The Property Source, we know exactly how to help you navigate the experience of buying a foreclosed property. While we encourage you to give us a call so that we can explore your particular needs and requirements, we want to share with you just a few of the strategies we use in making sure that you’ve got every possible advantage in getting the foreclosure you want.
First, we always assume that there are other offers on the property. Why? We want to go in with the most competitive offer possible, and thinking that no one else is interested might lead to making a lowball offer that is rejected immediately. When discussing your target price, make sure we know the amount you’re actually willing to pay — because you will probably want to lead with that offer. If you’re able to make a cash offer, that’s even more likely to capture their attention.
Next, the more complete the paperwork, the better! We will ask you to have any loan pre-approval letters and other documents ready to go, along with a complete contract and even a copy of the escrow check you will submit if your offer is accepted. Whether the seller is a lender or the homeowner, they’ll be more motivated to accept your offer if they see that there’s already money on the table and you’re prepared to move through the closing process immediately.
Also, in the contract, consider limiting the number/scope of the contingencies you put on the sale. You may want to accept the results of an inspection on major systems only (heating/cooling, plumbing, roof, etc.). You can also offer a quick closing date if you’re prepared to have the funding available in a short timeframe.
Finally, as with any home purchase, try to stay objective and keep your emotions in check. You don’t want to have already moved into the home in your mind, only to find out that the bank or homeowner has accepted another offer. Working with a licensed, experienced real estate agent — like us! — can help you keep a clear head and make the best decision for your future and finances in the process of buying a foreclosure.