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Five
Tips for Buying a Foreclosure Property Below Market Value
By
Jim Saccacio, RealtyTrac Chief Executive Officer
If
you feel like the escalating costs of real estate have priced you out
of the market, think again. It may be time to investigate the
vast opportunities available in the foreclosures market.
For
people willing to do a bit of homework, the foreclosure market offers
some of the best opportunities available in real estate today.
Experts point toward significant growth in available foreclosure
properties, so there’s never been a better time to line up your
resources and educate yourself about this previously hidden market.
It’s not unusual to save from 10 to 30 percent of the market value on a
foreclosure property, and certain properties offer savings of 50
percent or more! There really are bargains out there. You just
have to know where to look.
Web-based
services such as RealtyTrac give consumers access to foreclosure and
pre-foreclosure information that was previously available only to
professional real estate brokers and investors. Today, homebuyers can
use these services to identify and research potential home purchases,
as well as to find the tools and professional resources they need to
help them close the deal. RealtyTrac, which provides all the
foreclosure data for both MSN House and Home and Yahoo!
Real Estate, has already compiled a list of over 550,000
foreclosure properties across the country.
The
keys to a successful foreclosure property purchase are diligence and
patience, along with taking an educated approach to investing in this
market. RealtyTrac CEO Jim Saccacio offers five tips to help you close
a deal on a foreclosure property:
1.
Learn about the different types of properties and the foreclosure
process.
Not
all foreclosures are the same! You need to educate yourself on
the difference between the three basic types of properties, including
notice-of-default (NOD), notice of trustee sale (NTS), and
real-estate-owned REO, as well as the positive and negative aspects of
buying at each stage of the foreclosure cycle.
As
a rule of thumb, the best savings can be made at the pre-foreclosure
stage, where home owners can avoid a foreclosure and lenders can save
the time and cost involved in going through the process. Another
critical point in the process is immediately prior to the auction date,
when all parties might be most open to a last-minute solution.
2.
Secure financing early
It’s
important for a buyer to be pre-qualified before engaging in
discussions with a seller. This ensures that the buyer is in a
financial position to purchase the property, and is in the strongest
possible position to negotiate.
3.
Engage a real estate agent as a “buyer’s representative”
There’s
a distinct difference between a buyer’s and a seller’s
representative. Buyer’s representatives have the home buyer’s
interests at heart, and are charged with finding the right property and
negotiating the best price for their clients. Picking the right real
estate agent will make your life much easier. Ideally, select an agent
who specializes in the foreclosures market and has specific experience
in REO properties.
4.
Do your homework
Purchasing
foreclosure properties is somewhat more risky than buying traditional
real estate properties. But, with that risk comes reward in the
form of much higher potential savings. With the right examination and
due diligence, buyers can significantly reduce the risks. As with any
purchase, timing is everything! But, it makes sense to give any
property under consideration a thorough examination, including
determining its condition and value, finding out the amount in default
and the remaining loan balance, and running a legal investing report to
make sure the property is free of any financial liabilities. Of
course, it never hurts to foster a positive relationship with the
seller!
5.
Make a realistic offer
If
you want to be taken seriously as a buyer, you must be realistic when
preparing an offer. Lenders aren’t likely to give properties
away, particularly in a real estate market where prices continue to
rise. Additionally, homeowners in financial distress may be
difficult to deal with, particularly early in the foreclosure process.
An educated buyer—one who knows how much is owed on the property and
what its market value is—can usually come up with a realistic offer;
one that offers significant savings, while meeting the requirements of
the lender.
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