Some houses in foreclosure need a lot of repairs.
If you want to buy a house for a bargain price, consider buying a foreclosed property that needs a lot of work. Other buyers are scared off by the repairs the house needs, so they won't make an offer. The bank will be highly motivated to sell, so it can stop paying utility and maintenance costs. That combination could mean a cheap house for you, if you're willing to take on the work.
Instructions
1. Determine whether the property is in lendable condition. If you want to get an FHA loan, the property must have everything, down to flooring and properly-installed handrails. Conventional loans are more flexible, but still require solid foundations and intact roofs. A local lender will be the most versatile, but will likely have a higher interest rate. If you're in doubt about whether the house is lendable, ask your mortgage broker.
2. List necessary repairs and determine the cost. Necessary repairs are those needed to bring the house into safe, livable condition. They include such items as foundations, roofs, electrical systems, plumbing, windows and siding. You may need to get bids from a contractor to determine the cost of these repairs.
3. List repairs needed to bring the house to full market value and determine the cost. This will include new carpeting, paint, kitchen and bathroom updates. If there is a basement, you may also have to install egress windows.
4. Decide what you're willing to pay for the property. Add up the costs to make the house safe and livable. Boost that figure by up to 20 percent to account for your time and labor. Subtract that from the market value of the property (which can be determined by the listing price or by what other houses in similar condition are selling for), and you'll have an idea of what you should reasonably pay for the house.
If you choose, you can subtract the the costs that it would take to bring the house to full market value from your offer. If the house has just come on the market and it's generating a lot of interest, it would be wise to offer a higher price. If the house has been listed for a long time with no offers, you can safely offer less.
5. Compile evidence of the property's defaults. This may be in the form of a structural report, contractor's bid or photos of damage.
6. Submit an offer through the listing agent. Submitting through the listing agent can be helpful because if the bank accepts your offer, that agent gets both sides of the commission. More money equals greater incentive for the agent to push for your offer to be accepted.
The agent will write up an offer with your price and submit it with the evidence you've gathered. If the bank rejects your offer and the house is still listed a month later, submit the same offer. Repeat your offer until the house sells or the bank accepts your price.
Tags: your offer, bring house, determine cost, market value, accepts your
