Smart investors know foreclosures can be your best asset – or your worst enemy. The difference lies in the purchasing process; whether you bought the house during pre or post foreclosure, whether you devised a financial plan in advance, and even whether you worked with an expert on foreclosures can all impact your buying experience in Phoenix. Here is our quick guide to making your foreclosure purchase the best experience possible:
Before You Buy
The first step to getting a great deal on a foreclosed property is to determine when to buy. We’re not talking about the time of year – we’re talking about the three stages of foreclosure sales:
- Pre-foreclosure
- Auction
- Post-foreclosure
Pre-foreclosure is a win-win situation because the homeowner is not in foreclosure yet and is under pressure to sell the home quickly or face financial backlash. This is a buyer’s market – as long as they are ready to move quickly. The best way to get a pre-foreclosure is to get pre-approved by a lender and come to the sale ready to buy right then and there.
Beware of auctions. You might think you’ve found a great bargain at auction, but ultimately you will pay the price. Buyers are not permitted to inspect the home for damage prior to the purchase. The home may have senior liens (outstanding taxes) which would then become the buyer’s responsibility. Auctions generally require cash payments as well, which is enough to deter many otherwise qualified buyers.
Post-foreclosures are also known as real estate owned properties (or REOs). This means the bank won at auction and is now trying to recover the money they lost on the home. Generally there isn’t much room for negotiation with foreclosures in any stage, but if a buyer has been pre-approved for a loan and the home has been on the market long enough, there might be room to bargain.
Financing Your Purchase
The time to work out financing is before you buy a house – not after. Get pre-approved by a certified lender unless you plan to pay cash at auction. Pre-approval means a lender will write a statement of how much you can borrow based on your current credit score and income. This is the best way for agents and sellers (in this case the bank) to know you are a serious buyer and have the funds to complete the purchase.
Be aware you’ll need to set aside more funds than those allotted to the house. Many foreclosures have sustained damage or vandalism. The previous owners might have purposely trashed the home because they were resentful about losing it. There are a variety of things that can happen when moving into a foreclosure, but repairs are the one thing most people can count on.
After You Buy
If you bought the house at auction, the previous owners might still be there. In this case, you will need to serve the current tenants with an eviction notice and start eviction proceedings after the allotted amount of time.
Evaluate the home for damage and employ contractors to help make repairs if needed. If your home has less damage than expected (or none at all), then reallot the money toward flooring, paint, furnishings, and other things to make the house feel more like a home. If you plan to become a landlord and rent the house, you will want to invest in sturdy materials that can withstand a great deal of use.
The hardest part about buying an investment property is waiting for the land to appreciate. Usually, foreclosures are purchased to provide a solid return on investment in the future. To choose a property that will accumulate the most increase in value, it is best to work with a Phoenix foreclosure specialist like All Homes AZ. Foreclosure experts know which areas are likely to experience a boom in upcoming years and can make expert recommendations based on your investment goals. Get the experts on your side.
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