I have a very basic question:
I've decided to buy homes from distressed sellers (absentee owners, pre-foreclosure etc.)
Can I use a mortgage to pay for it, or do they always require cash for it.
If I take a mortgage loan with a bank, will they pay the seller?
What if the property has lot of damage e.g. fire damage? Do I need to pay for it all in cash?
That's actually a really broad question @John Valence . There are a lot of different options out there when it comes to financing.
Bank financing is probably the easiest to qualify for personally, but harder to get a property to qualify for. If it is in rough shape, a bank will be less than willing to lend on the property. They like to see homes that are in safe, habitable conditions as that carries a lot less risk. If you're trying to buy properties from distressed sellers, the traditional tactic is to entice them with a cash purchase so that you can close quickly and without any hassle. If you're trying to finance the property, that can take anywhere from 45-60 days, at which point they could probably get a better price by listing it on the open market.
Before going too much further forward, I'd encourage you to try and read up more on what it takes to purchase distressed properties and do whatever it is (I'm assuming flip) to them. You might even want to consider trying to network with people who regularly do this and try and pick their brains on the process. Check out your local REIAs... they're usually full of experienced individuals.
Depending on the amount of repairs the home needs will determine if the bank will finance the purchase. If it is not liveable, bad roof, fire damage, no stove, etc it will not qualify for traditional financing. You could put it under contract, apply for the loan, and then the lender may have a list of repairs that would have to be completed prior to closing. You would have to do the repairs out of pocket in order to get the loan officer to complete the loan.
Remember that just because the house is cheap, doesn't make it a good deal. Good luck.
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