Just like most things, the foreclosure market has its pros and cons. Therefore, the best way to approach it is to do your homework and research.
The most important step you can take in preparation for buying a foreclosed home is to become pre-approved for a mortgage-thus realizing your purchasing power. Becoming preapproved is a simple step; all you need to do is contact one of Ocean Communities knowledgeable loan officers with the following documents and licenses:
- Drivers License
- Most recent paystub(s)
- Two years of personal tax returns including all w-2’s
- Two years of business tax returns (if applicable)
Foreclosure sales are a great way for a buyer to get a home at a great price. However, there are some things one should know and look for when considering this option:
- You should make sure to choose a Realtor that has worked with these types of sales before. An experienced Realtor will know what to look for when trying to negotiate the price of the home, along with setting realistic expectations throughout the process.
- Foreclosed properties are sold in an “as is” condition. This is extremely important to know because most financing options will not allow you to close on your mortgage to buy the property unless the appraisal report reflects a flawless property. Appraisers have to ensure that everything is in working order and the property is “move in” ready. If the property needs to be worked on (examples: painting, trim, flooring repair, etc), it will need to be done prior to closing. Lets say you accept a contract in an “as is” condition and you need financing to buy the property. If the property ends up needing work, you risk losing your earnest money deposit or you will have to renegotiate with the selling bank to see if repairs can be made (which adds time to the process before you can close).
- If possible, find out who the selling institution is. This is good to know because if a smaller bank is selling the property, less people are generally involved with the decision. Therefore, the response time to your contract negotiation and loan closing is much quicker. If the selling bank is a larger, recognizable bank, you should work with your realtor to understand realistic time frames for responses. This process can take anywhere between weeks and month, so it is recommended you consider smaller banking institutions.
- Title costs for foreclosed homes can be extremely high. Most foreclosed homes require a Class D Survey that confirms that the property boundaries have not changed from what is listed on the Title. Improper right of ways or encroachments of structures by neighbors could alter these property boundaries. In addition, the Title has a record of all liens from past to present on the property. If the property has been vacant for some time, additional items may need to be cleared up by the Title Attorney.
