Four Steps to Getting the Foreclosure You Want
June 29th, 2009 categories: Real Estate News, Relocating
For many of us, the current housing market feels alot like, as Yogi Berra might say, “deja-vu all over again.” Five years ago, in the midst of the runaway market, many homes were on the market for less a day before we witnessed multiple offers presented to the seller. In hindsight, one might conclude that the market was “out of control.”
Today’s market landscape looks very similar. As they say, the players have changed, but the “song remains the same.” Much like then, the multitude of today’s bargains comes in the form of foreclosures.
While there’s been much in the press about the the ugly side of foreclosures (owners destroying the property, evictions, mold, etc), many foreclosures on the market are in excellent condition. Very much like the condition they were in when purchased at the height of the market in 2004-2005. Yet, many of these properties are purchased for 35-50 percent lower than what the current owner paid for them. And, in a few cases, even cheaper. But, how do you find these properties before the competition? How do you level the playing field with the investors that have been in the business for years?
While there is no full proof method for success, there are three important steps that dramatically improve your opportunity to successfully purchase foreclosed properties.
The Steps to Success
1. Identify the property the first day it’s listed for sale on the Multiple Listing Service (MLS).
Better yet, locate the property before its actually foreclosed on. many of these properties have been on the market prior to foreclosure, as a resale of short sale. If this doesn’t result in a sale, they’ll be ripe for the pickin’ at the lower foreclosed price point. But, once they’re on the market as a foreclosure, it is, as they say, “the early bird that gets the worm.”
Seeing it on day one of its listing on the MLS probably depends on getting that information from your Realtor. So, hopefully, your Realtor has set you up with a direct feed of Foreclosures. Most MLS programs now offer the Foreclosure option. If that’s the case, have your Realtor provide you an automated feed of new Foreclosures on a daily basis. While this step a must do if you expect to catch the listing on day one, the second step to successfully getting the foreclosure you want is equally important.
2. Strike quickly.
Submitting a contract as soon as possible is vital to getting your contract accepted. As I discuss with my buying clients, during the contract process, we take things one step at a time. Our goal is to “get to the next step.” By that, I mean that we take things one step at a time. In the case of a foreclosure, we want to have the first contract submitted. The sooner we submit a contract, the less opportunity we give competitors to do the same. Multiple contracts are NEVER in the interest of the buyer. The preparation or due diligence necessary to protect my buyer should have been done ahead of time. Things like looking at comparable properties, neighborhood issues, history of the property, unpaid liens, should be done prior to the offer. But, many of these can be examined prior to the submission of the contract. Another key to securing the property is the terms the buyer is asking for.
3. Make it Easy For the Seller
If your goal is to buy a foreclosure, many pruchasers are looking for as little work as possible. For REO, or bank owned properties that are on the market as foreclosures, the banks are looking for the same thing; as little pain as possible. Since the onset of the current mortgage meltdown, lenders have been inundated with defaults. They aren’t in the property management business, and want to rid themselves of their properties as quickly as they can.
Avoid contract contingencies. Routinely, foreclosed properties are sold “As Is“, which means the buyer will take the property just as it is, at the time of the offer. Should you include a Home Inspection contingency in your offer? That is certainly an option, but not one I’d recommend. Remember, your goal is to get to the next step and provide the bank with few, if any, reasons to say no. However, asking for a home inspection for informational purposes can serve the same purpose, if, at some point, after ratification you decide to withdraw from the contract. Additionally, often, in bank owned (REO) foreclosures, the necessary bank Addendums to the contract will often allow you to alter terms before the contract is “fully” ratified by both parties. While the interaction with various banks are routine and standardized, there are some often differences from bank to bank, with specific procedures. Many banks negotiate one contract at a time. And, you want your contract to be the one they’re considering. So, banks are keying in on the “net” cost to them, make sure your terms aren’t providing the bank a reason to say no to your offer.
4. Go with Experience.
Real estate transactions can be easy, or they can be…not so easy. Make sure you’ve enlisted the services of a professional real estate agent. What does that mean?
It begins with experience and competence. While those traits don’t necessarily go hand in hand, they’re often found in pairs. First, it helps to have someone on your side with foreclosure experience. While the transaction process is fairly straight forward, having an agent that knows how the process works, and knows how best to “work the process” is invaluable. They’re familiar with the necessary timing, procedures, and strategies to accomplish the objective. Further, as the process unfolds, they’ve worked foreclosures with banks previously, and understand what it takes to get you to closing. They have the experience and the competence to close the deal.
Good deals abound in today’s housing market for home buyers. Many of those deals come in the form of foreclosed homes. Capitalizing on the foreclosure opportunities involves a few simple steps. By taking the time to become aware of what’s available, and acting decisively with the aid of an experienced professional, you can maximize your chances for success. Of course, you first have to find something you want to buy. So, how hard is that?
One definitely wants an experienced real estate agent or auctioneer, because the good ones really know how to work the deals/crowds and get you what you want or at least close to it…
Our professions are similar to others – Experience and sound judgment are vital to success.