Whether you are purchasing a new home or looking for an investment property, bank-owned properties offer several potential advantages.
If you are buying a house to live in, you may be able to get an attractive price that makes your budget go further and allows you to accumulate equity more quickly. Meanwhile, if you want to flip a house or hold onto it as an investment, you are more likely to be able to buy low and sell high.
However, purchasing a foreclosed home differs from a typical real estate transaction in a few important ways. If you are considering buying a bank-owned property, here are a few quick tips to get you started.
1. Get your finances in order
There is a common misconception that a buyer must be able to pay cash on a foreclosed property. While it is true that cash offers have the best chance of success in a competitive foreclosure market, it is certainly possible to finance a bank-owned home.
If you need to finance, make sure to get preapproval for a mortgage before approaching a broker. This can help expedite the closing process and may make your offer more attractive to the bank.
2. Be prepared to act quickly
Banks are typically eager to move foreclosed properties quickly, which is one reason that cash is common in bank-owned transactions. If you are financing, make sure you have a loan preapproval letter before making an offer.
Because banks want to close as quickly as possible, they may charge daily penalties for any delays. Confirm with your lender that there are no potential obstacles to receiving financing.
3. Insist on an inspection
Foreclosure purchases are nearly always “as is.” You should not expect the bank to make any repairs or improvements.
However, you should make any offer contingent on a home inspection. In addition to potential issues arising from long-term vacancy, in some cases former owners in default may have purposefully damaged the property before leaving.