I have many people calling asking to buy foreclosure properties. But do they really know what that means? Buying a foreclosure comes with great opportunities, greater pressures and unknown pitfalls in the foreclosure market. First, you have to decide at what stage of foreclosure you want to buy. There are three options: 1. pre-foreclosure (also known as a short sale); 2. sheriff's auction; 3. repossession, called REO (for real estate owned by the bank).
Pre-foreclosure: These homes are in the foreclosure process, but they have yet to be sent to auction. Potential buyers must negotiate a deal with the lender as well as the current owner. That makes buying at this stage of foreclosure complicated and slow. But, you have the advantage of being able to inspect the home and negotiate for repairs or credit for repairs before purchase -- which isn't the case in other types of foreclosure sales, but the prices remain high.
Sheriff's auction: These sales yield the lowest prices, but they are fraught with difficulties, like the house being unavailable for inspection and probable repairs which you were not prepared for. At this point, you may also be responsible to clear any liens placed against the property. This stage is usually best left to the professionals - the contractors and investors who know what they're doing.
Repossession: This occurs after the home has gone through a sheriff's auction but does not sell and the bank gains possession of the property. Homebuyers may not get the best bargains during this stage, but they can nearly always perform a thorough inspection before closing, minimizing costly surprises. Plus, the property comes with a clear title. Even in this safer stage, though, homes are still usually sold in "as is" condition," but the process can be faster. The pitfalls to avoid are: Do not get caught up in a bidding frenzy, and do not underestimate repair costs. Not knowing what comparable properties cost, can mean that you must be prepared for eroding prices in high foreclosure areas. If you are buying for the short-term, the better bet would be is to buy the only foreclosed home in an otherwise stable community that will hold its value. Not having financing in place is as good as not being in the market, as banks often jump on the highest bid with the best financing already in place.
Interested in learning more about buying distressed property in Tampa? Call Nancy at 813-78-7836.