The number of foreclosures on the market over the last 5 years has risen dramatically. Currently in Illinois, there are areas where most or all of the sales are actually bank-owned foreclosures. For many buyers, the process of purchasing a foreclosure is unknown and there are a lot of myths out there that really don’t help or are flat-out wrong. The process of buying a foreclosure, bank-owned, corporate-owned or REO property has changed drastically just over the past few years. This post is intended to highlight the top 5 misconceptions about purchasing a foreclosure. As I’m sure you know, the market is constantly changing. It’s important that you work closely with an agent that specializes in foreclosures and bank-owned properties. I can help you safely navigate this process and have many years of experience in the foreclosure market. Call (630) 346-1041 or email me at email@example.com for more information.
#1. Foreclosures are Trashed and Need Lots of Work
While this is sometimes the case, it is actually more common in this market that foreclosures are in much better condition than you expect. Because there have been so many, banks have gotten the sale of these properties down to a process. The banks and asset management companies that sell these properties have realized that more can be made by elevating a distressed property to a repaired property. For this reason, many foreclosures are being repaired or even rehabbed before they are listed. You will still occasionally find your typical torn up foreclosure or a mold house or similar out there, but there are also very good odds that you’ll find one with much less work to do and that most likely can be lived in while it’s repaired. Mould cleaning Singapore is your solution to the mould growth problem.
#2. Foreclosures are Always Strictly As-Is
Almost all of the foreclosure properties out there are being sold as-is and you will have to sign a contract and multiple addenda that state that you are purchasing the property strictly as-is. However, many home buyers are learning that as-is doesn’t mean as-is 100% of the time. Usually with an as-is purchase, as a buyer, you are allowed to conduct an inspection of both home for damages and repairs you would need to perform, and the territory around like garden check for pests (which might also be found inside the house, as reported by PCC and other trusted contractors). Then must decide whether or not to purchase the property with all of its issues or back out of the deal. What you’re not supposed to be able to do with an as-is purchase is negotiate any inspection issues. What buyers are finding is that banks are more and more willing to conduct small repairs or give credits for issues found during an inspection – even with as-is purchases. This goes against the very definition of an as-is purchase but it’s happening even so. The difficult thing to gauge is what the bank’s response will be to a request of this sort. I’ve seen everything from agreeing to give credits or repairs to up and cancelling the contract and going with another offer. The most typical response to a request of this type is silence – they simply won’t respond. But buyers are having limited success. Perhaps the biggest thing to keep in mind if you choose this route is to be aware of all consequences and be prepared for all of them. Sometimes a deal is so good you may not want to risk losing it for a rather small repair credit. It’s all up to your personal tolerance for risk.
#3. You Can Usually Negotiate 30% Off of the Price of a Foreclosure
While this may happen in rare situations, it’s by no means likely. There are lots of rumors out there and I’ve had clients that come to me having heard that this is normal. Right now, it’s almost the reverse that’s true. Many foreclosures are selling quickly for at or above list price. This can be a shock particularly for buyers expecting to be able to negotiate the price down greatly. I have been able to negotiate significant amounts off of several foreclosures but in every case, they were homes that had been on the market months and had significant repair issues. In fact, you’re much more likely to be able to negotiate significant amounts off the value of a short sale than a foreclosure.
#4. There’s a Significant Wait Associated With Purchasing a Foreclosure
While there have been cases where foreclosures have had a protracted closing process, in most cases foreclosures move very fast. The banks that own these assets have prioritized getting them sold. Every month that these homes stay on the market and on the books means additional tax payments and carrying costs. In most cases banks will actually prioritize offers that include a 30-days-or-less closing. They’re going to do anything possible to get these homes sold quickly. Occasionally there are foreclosures where title issues come up and there was also a period where all foreclosure sales were delayed due to the robo-signing fiasco, these are and were isolated incidents. In most cases, purchasing a foreclosures is about as easy and straight-forward as it gets in this market. If you have cash, closing within a week is not beyond reason.
#5. You need Cash to Purchase a Foreclosure
There are all kinds of misconceptions regarding how to finance the purchase of a foreclosure – needing cash is just one of them. The truth is, you can generally buy a foreclosure with cash or any type of traditional financing like a conventional, FHA or VA loan. There are certain exceptions: in the case of foreclosures that have been trashed with broken windows, missing kitchens, ripped out plumbing, no furnace etc. you may find it difficult to get financing. However, this is more of a function of the lender taking issue with these things than actually being able to purchase the home with a certain type of loan. Creative financing is often not going to work when purchasing a foreclosure – lease-with-option, lease-purchase, land contracts, articles for deed or other types of creative ways of financing a home are almost never going to fly with a foreclosure. Cash is often king when purchasing a foreclosure for several reasons: you can move quickly with the purchase and this can make your offer more attractive and you can also purchase the homes that are too torn up for a lender to extend financing.
Purchasing a foreclosure can be an excellent way to develop instant equity in your home as well as an excellent investment for the future. The foreclosure process can be a bit tricky – that’s why it’s important to work with an agent experienced with REO properties. If you are going to be shopping for a foreclosure along with other types of homes, I would love to assist you. I have been helping buyers purchase foreclosures since I first started working in this business and have the knowledge and experience you need.