FORECLOSURE PURCHASE STRATEGIES

Types of Foreclosures

Various types of mortgage institutions foreclose properties from homeowners who failed to meet the mortgage requirements for any number of reasons. The main types of foreclosures include those offered by HUD (Housing and Urban Development), FANNIE MAE (a government sponsored enterprise), and the banks themselves (Wells Fargo, GMAC, Bank of America, etc.)

Values

The list prices vary based on the institutional owner because they may have certain guidelines they must follow.  HUD homes, for example, have to be listed at a market value for a period of time before the listing price is reduced.  The asset managers can and will consider any offers, so do not be afraid to make a low offer.  The benefit of working with HUD is that their response time is very good.  I negotiated one home for a client and made over seven offers before the asset manager would accept the deal.  This was in a period of 6 days!

Repairs

Foreclosure properties are sold "as is", so have the property inspected prior to closing and be expected to make the repairs from your own resources after closing.  You are no longer able to estimate repairs or obtain bids to hold funds at closing

Buyers

Offers from homebuyers wanting to purchase their primary residence will receive favorable consideration over investor purchasers in some cases, such as HUD homes. Any offer should include proof of funds for cash buyers and pre-qualification letters for traditional buyers.

Competition

Buyers looking for foreclosed properties are competing with others, so timing is crucial on good properties.  Our services include establishing specialized MLS searches that notify our clients immediately when a foreclosed property meeting their predetermined criteria comes on the market.

Hot properties can attract as many as ten offers in the first few days after the home is listed.  So may offers are received that the banks will cease accepting offers and consider only those offers in hand.  One property in Mansfield received eight offers in two days, and my clients lost the home because they were out bid by someone willing to pay more than list price for the home.

Steps to Success in Buying Foreclosures

Be ready to decide on a home quickly.  When Superior Realty is working with foreclosure buyers, we show homes with a blank contract in hand and ask our clients to bring a check for earnest money in case we need it.  If a house meets the clients' criteria, we prepare the offer and get it to the listing agent quickly.  Of course, prior to showing we check with the listing agent to see if their are offers on the property. 

Properties are listed with many different listing offices, and some are outstanding to work with because they offer clear instructions on their listings on the required documents.  Most REO departments will not accept an offer unless it is complete and meets their documentation requirements.

Package your offer with everything to make the offer appear more desirable to the bank.  Include proof of funds and a pre-qualification letter, and if you have sold your home a HUD-1 settlement statement on the sale