Buying a house that is in foreclosure can net you a great deal. It can also become a nightmare if things go too badly wrong. To get the house of your dreams for the right price, consider these insider secrets to ensure the process goes smoothly:
Watch Out for the Redemption Period
A house in foreclosure goes through several steps, and the original owners has options during some of these. In general, once you get to the Sale, or Auction, stage, the owner is done with the property. In certain situations, however, you have to watch out of the redemption period.
The redemption period in California only applies to judicial foreclosures, so most of the time this isn’t something you’ll have to worry about. If you are looking at property in judicial foreclosures, be sure ask about the redemption period, as it can throw a real wrench in your plans.
During this period, the original owner has the right to buy back the property from you if they can pay you everything you spent on the property, plus expenses and interest. It’s rare, but if they are eligible and able, you’ll have to sell it back.
Choose Location Wisely
A great deal on a foreclosed property might not be a great deal at all if the location is wrong. You can’t just look at the property itself. Look at what’s around it? Is it in a desirable neighborhood? Is the area attracting buyers or driving them away? What’s been the rating trend for local schools over the last decade?
If you’re buying a property to rent it out, be sure to look at rental rates in the area, both current and historic. You’re looking for trends here, too. The trend should be steadily up. A recent sharp spike isn’t as reliable as a slow, steady trend upwards. At the same time, a short and sudden downward trend might not be anything to worry about. However, a slow, steady downward line is a warning sign that you might be making a poor investment choice.
Find Out Why It Is in Foreclosure
To the layperson, a foreclosed house is just a foreclosed house. Insiders know to check the reasons behind the sale. A lot of homes don’t go into foreclosure until after they’ve already been offered up as short sales but for some reason never sold.
Find out if the property you’re considering was ever in a short sale and why it didn’t sell. If it didn’t sell because the bank wouldn’t accept less than the present mortgage, the potential buyer didn’t qualify for a short sale, or buyers just weren’t interested in the hassle, you can keep looking at the property.
However, if the property didn’t sell because the sellers stripped it of every asset or vandalized it in revenge, you need to know. If it didn’t sell because the location is bad or because it’s been overpriced at the current mortgaged amount, you probably want to look elsewhere.
Be Prepared to Deal With Banks
Buying a foreclosed property can be a very long process. In many cases, homes are being sold by huge financial institutions that run very slowly. Selling that one house just isn’t a big priority for them. You could run into a tidal wave of red-tape and bureaucracy buying a house that is in foreclosure.
Make sure you’re in a good financial situation before you begin. Have patience, and don’t worry if you don’t hear back from a seller right away. Be prepared for a slightly different purchasing process, too. Sometimes banks have their own contracts that protect them at your expense.
Buying a House That Is in Foreclosure
If you’re ready to get a deal on a great property, talk with Teresa Mack. She has the expertise you need to find out about properties and neighborhoods, navigate bank issues, and find out just why a property is in foreclosure.