There is no question – now is the time to buy a house. Foreclosures are at an all-time high and their presence in the many markets creates a feeding frenzy every time a new one comes up for sale. These homes are listed in every section of the market and are often in very good shape structurally; some only need light cosmetics (think paint and carpet). Like anything in life, it pays to be prepared. Here are some tips to make your experience as profitable as possible.
1. Be Ready – Foreclosures are cheap for a reason: banks want to sell them fast. In many cases banks will find buyers within 3 days of their initial listing. If you know you want to buy then be ready with a mortgage preapproval before you start looking; banks will require proof of financing before they will consider your offer, no matter how strong your offer is.
2. Do Not Be Afraid To Get Your Hands Dirty – Some foreclosures are in great condition but, by and large, you are going to have to invest some sweat equity to get your new home habitable. Do not let the cosmetics scare you away; look for strong structural components like good floorplans, great neighborhoods (remember: location, location, location), and newer roofs. You can change the carpet – you cannot move your house.
3. Know The House You Are Buying – The home inspection is NOT the place to save money. Get the best inspector you can afford and be present at the inspection. If the house has a septic tank, make sure you get that inspected, too. Banks usually will not fix anything so it is really important to know the condition of the home you are investing in.
4. Be Prepared To Pay Close to Full Asking Price – In some of the hotter foreclosure markets (Florida, for example) banks are not willing to negotiate much on great houses. They price them at 60%-80% of fair market value up front in order to sell quickly and, if you waste time nickel-and-diming the bank, someone else is likely to purchase the home you like. This is especially true of new foreclosure listings.
5. Use A Realtor! A good agent can find great new foreclosed homes that fit your needs as soon as they come on the market and can be an invaluable tool when it comes to negotiations. Agents will be able to help you pinpoint good neighborhoods and potential trouble spots with your house. And since the bank pays the realtor at closing, he or she is free for you!
The markets right now are a perfect storm for sellers – but there has not been a market like this for buyers in several generations. Home prices and interest rates are really low right now making homeownership more affordable than it ever will be again. Now is the time to buy. If you wait until prices are rising again, you will have waited too long. And, if you are a first time buyer, the government has a special limited time opportunity waiting: $8,000 towards your new home.
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