In many parts of the United States buying a foreclosure is en vogue. Buyers flock to these properties because they are allegedly a great deal. But, are they?
While each and every foreclosed property listing is different, there are quite a few considerations with respect to purchasing a bank-owned foreclosure (REO). And, sadly, not every bank-owned property is a great deal!
Here are some things you may want to consider when purchasing an REO:
- In parts of the United States, there is great competition for REOs. Do you really want to compete against so many other people to buy the foreclosed property? (Competition drives up the purchase price.)
- Are you qualified to go high enough in your offer to compete with the others or is your first offer your highest and best? (Again, competition drives up the purchase price.)
- Will your offer be strong enough? (If you are obtaining an FHA or VA loan and putting little to no money down, your offer may not–unfortunately-be competitive.)
- If you are financing the property, will the property pass inspection? Fixers, for example, may not pass inspection. (FHA and VA loans require a property inspection and the property must meet specific guidelines.)
- If you are financing the property and it is in a Homeowner’s Association, will the lender approve the purchase? (Lenders now look at association delinquency rates and pending litigation when agreeing to loan on a property.)
- Once your offer is accepted, will the property actually appraise for the purchase price? What will happen if it does not? (If the competing offers drive the price very high, the new purchase price may be actually higher than an appraised value. If you are getting a loan for the purchase, this factor may impact your ability to obtain financing.)
- Will the bank be able to transfer title? (In this day and age, some lenders are finding that they are unable to transfer clear title on some properties.)
There are so many factors to consider when purchasing a foreclosure. While the purchase may be a great deal, make sure that all the cards are on the table and that you have considered all of the factors that could impact your property purchase.