OK, so now you’re pre-qualified!
Where do you begin to find your dream fixer upper to renovate? There are many misconceptions about distressed properties. Let’s go through some common things you might want to know:
Bank REO and Foreclosed Homes
Usually when a property is being foreclosed upon, it eventually sells at an auction – in many cases – a court ordered auction handled by the local Sheriff’s department. This is not normally where you want to make an offer.
Understand that in most cases you can’t get inside these properties prior to making an offer and the lender may not even be able to get inside the property to do an appraisal! Why? Until the time the deed actually transfers out of the owner’s name that’s being foreclosed upon, that owner still owns the property! As a result, no one really has a legal right to enter this property without that owner’s permission. Often times that owner lacks incentive or interest to be cooperative – they are losing their home.
Until the bank takes legal ownership of the home through the foreclosure process, there very well could be mortgages or other liens against the property that exceed it’s true value. The foreclosure process strips these liens away.
Market Value vs. Outstanding Balance
The balance the present owner owes on the property is in no way a reflection of the property’s true value. You really need to access the value of the property by looking at similar properties and what they have sold for recently.
Once the bank takes possession of the property they are going to, more than likely hire an appraiser and a Realtor to help them determine the true value of the property. These banks do NOT want to own this property. They will generally price the property to aggressively and quickly sell it. This doesn’t mean the institutions or the Realtors are willing to sell them for pennies on the dollar.
If you’re planning to make an offer way below the asking price chances are you simply won’t get your offer accepted. Many buyers lose 3 or 4 potential ‘dream homes’ because they think the banks are so motivated they’ll take anything. This isn’t normally the case.
Work with a Realtor
So how does one find a great diamond in the ruff home worthy of making an offer on? You need to work with a knowledgeable Realtor in the area in which you plan to buy. There is likely no substitute for the experience and advice a good Realtor can provide to you. What’s more, home values are very much established neighborhood by neighborhood – and your Realtor likely knows the neighborhoods!
You, your lender, and your Realtor should work like a “team” to successfully find a great distressed property that needs renovation. Having the right team on your side can make all the difference in the world when finding the right property – so choose wisely!Click to See the Latest Mortgage Rates»