Buying a foreclosed home can be tricky.
Buyers hoping to purchase a bank-owned home -- one that a bank had to take over after its previous owners fell into foreclosure -- should have plenty of choices thanks to the housing crisis that hit the U.S. in recent years. But while there are plenty of homes to choose from, buying a bank-owned home can be complicated. Follow a few important steps to simplify the process.
Pre-Approval Is Key
Get pre-approved for a mortgage loan before you begin searching for bank-owned properties. Because bank-owned homes sell for prices that are below market rate, they often attract many buyers. You want to be as attractive a buyer to banks as possible. and one way to do this is to get pre-approved by a mortgage lender. When you are pre-approved, a lender has already studied your finances and credit score and has promised to give you a certain amount of mortgage money. Banks know that pre-approved buyers will have the mortgage dollars they need to actually close a sale. To get pre-approved, you'll have to provide lenders with copies of financial documents such as your last two tax returns, two most recent paycheck stubs and last two months worth of savings and checking account statements. Lenders will also run your credit score to make sure you have a history of paying your bills on time.
Find the Right Real Estate Agent
Find a real estate agent who has a history of working with bank-owned properties. Many real estate agents form long-term relationships with banks and can therefore help buyers find bank-owned properties before they are even listed on the market. Real estate agents who know the local foreclosure market can also tell buyers if bank-owned homes are being offered at a fair price based on similar homes in the area.
Order a Home Inspection
Order a home inspection before signing on the dotted line. An inspector will tour a home to uncover possible trouble points, which can everything from an aging roof to a cracking foundation. Bank-owned homes often arrive on the market in especially bad condition. This is because many owners who were foreclosed on could not afford to spend the money necessary to properly maintain the home and grounds. There are even cases where owners deliberately damage homes out of anger at being foreclosed on. A home inspector can help you determine how much money you'll need to sink into a bank-owned home after purchasing it. This can impact how much you'll be willing to pay for the home.
As-Is Condition
Bank-owned homes come as is, meaning that no one will make any repairs to these properties before you take ownership. Yo will be responsible for making any necessary repairs to bank-owned homes. Make sure the cost of these repairs isn't so high that it offsets the lower purchase price of the home.
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