The number of foreclosed homes for sale are at a record high. If you have been considering investing in real estate now is the time.
Interest rates and home prices are low and that is good news for buyers. Whether you are thinking about buying investment property or plan to live in the home there are some great deals out there right now.
The first step is always securing financing. To place an offer on a bank property you will need either a bank statement with proof of funds or a letter from a lender approving you for a loan. They will not even look at your offer without either of these items. They normally ask for an earnest deposit of a certain amount, you will also need a cashier's check for the specified amount to place your offer. Time can be of the essence when offering on some of these properties and if you are prepared you won't miss out and watch someone else get the home that you wanted.
Whether you have purchased a home before or this is your first home this is a whole different ball game.
You can get a very good bargain but there is risk involved with the reward. It's like a "scratch and dent" sale, you are buying as is without any warranty. I don't tell you this to scare you off, just to inform you. With the help of an experienced agent you can enjoy the rewards and minimize the risk.
The second thing you need to do is forget everything you know about buying a house as this entire process will be different. It even varies from bank to bank, your agent needs to make sure and spell out exactly what you are asking of the seller in the purchase agreement. Once you have an accepted offer the bank will have their own set of addenda for you to sign. You and your agent need to go over them carefully so you know exactly what you are agreeing to. They have their addenda drawn up by attorneys and they usually cover everything, bottom line is you are buying AS IS. If you have reservations about the bank addenda it may be worth your while to have your attorney look them over. Your agent should understand them pretty well but real estate agents are not attorneys.
You can still place an offer contingent on a home inspection if you want to even though the seller is a bank, this usually gives you 10 days to arrange and pay for an inspection. If the results are unsatisfactory and you are within your 10 day period you can get out of the contract and receive a refund of your earnest deposit. You do need your agent to go over the bank addenda though as sometimes they will shorten the inspection period and anything written in the bank addenda will override the purchase agreement. So, make sure you read carefully!
Other items to address are who is going to pay for title insurance, closing costs, revenue stamps, well and septic inspections and any required city inspections. Once again if you don't ask for these things specifically most banks will not pay for them.
Another issue to watch out for can be the closing date.
The bank will specify a closing date in their addenda and if you are not able to close by that date they can charge you a "per diem" charge for every day you go past the closing date. It is usually anywhere from $50.00 to $150.00 per day. If your offer is cash this is not usually an issue as you can be ready to close any time. If you are waiting on a loan make sure to give yourself some extra time for unforeseen delays. You can ask for an extension without penalties but they will want a reason and they are not obligated to grant the per diem free period. On the other hand, if they aren't ready to close they don't charge you and of course you have no choice but to give them an extension!
If there is anything I didn't cover here or if you have any questions about foreclosures please feel free to email me at t.halterman@exitlakeshorerealty.com or call me at 231-638-3090.