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HOW TO SUCCESSFULLY BUY A FORECLOSURE PROPERTY

HOW TO SUCCESSFULLY BUY A FORECLOSURE PROPERTY

19 February, 2021
By Nadia Chentsova
Simply stated, a foreclosure is a legal action initiated by a lender. When the mortgagor of a property is unable to keep up on their mortgage payments, the lender will attempt to recover the amount owed on the defaulted loan by taking over ownership of the property and selling it.
Generally, a mortgage default will occur when a specific number of mortgage payments are missed, but a default can also take place if the borrower fails to meet other terms stated in their mortgage document.

HOW TO SUCCESSFULLY BUY A FORECLOSURE PROPERTY

Knowing how to buy foreclosure properties can be extremely beneficial to any investor, as a home can usually be purchased for lower than what it may be worth. It sounds simple, but sometimes the process may not be as easy as it seems, so as with any investment, you need to know what you’re getting into before diving in. Here are a few tips on how to successfully purchase a foreclosure property.

GET PROFESSIONAL ADVICE

You may have the resources to purchase a foreclosure property and want to get right into making an offer, but you should seek the counsel of a real estate professional before doing so. A realtor will be able to help you decide if the property is right for you and what hidden costs might be found in the home. A real estate agent can also act as your guide through the process. There are many hurdles you will need to jump and having professional help will ensure you have the best chance of success.

HAVE THE PROPERTY INSPECTED AND APPRAISED

In many cases, a deal may seem too good to be true, and an investor will make a quick offer thinking they’ve made an incredible score. Unfortunately, if you haven’t had the property valued and inspected, you may find out the deal wasn't as great as you thought. A professional appraisal and home inspection will help you determine the true value of the property, and what kind of return you can expect on it in the future.

CONSIDER ALL ASSOCIATED COSTS

Buying a foreclosure home is more than just paying a reduced sale price. There are many other associated costs attached to buying these types of properties. A budget should be put together with expenses added to the cost of the property. Some of these expenses include cleaning and general maintenance, renovations, property and land transfer taxes, inspection and appraisal fees, interest rates and administration fees, and any other fees associated with financial documentation.

BE PREPARED FOR THE APPLICATION PROCESS

Before you make an offer or attend any auctions for a foreclosed property, you need to ensure you are prepared for the whole process. Here are a few things you can do to help your chances of buying a foreclosed property:
  • Organize and update all required financial and personal documentation
  • Pay down any outstanding debts
  • Improve your credit score as much as possible
  • Increase your savings as much as possible
  • Have a sizable down payment offer ready
  • Determine a payment plan that will work for your finances
Once you feel ready, go on the foreclosure property hunt, which may follow typical real estate selling protocol. Alternatively, you can make an offer at the auction of a foreclosed property.

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