"I hear so much about foreclosures" is now a good time to buy?
Chicagoland (including the south suburbs) has one of the highest rate of foreclosures ever.....there are unbelievable prices on homes...some as low as $8000. These kind of prices make many buyers want to buy foreclosures, however there are other questions buyers should be asking before making an offer on a foreclosed property.
"What should I do first?" This is the what buyers should ask next!
Be prepared with the right loan or if you are paying cash, have a proof of funds letter or statement from your bank to prove you can buy. If you getting a loan, know that not all loans are for foreclosures. If it is an investment property or second home you are buying be prepared to pay a higher interest rate and pay a larger down payment. If you have FHA financing, know that the property must be liveable and all utilites will need to be operating and turned on for the FHA appraiser. If the utilities are not operating and the house is not liveable you will not qualify for a regualar FHA loan, however there are other FHA products available for rehabbing, but be prepared to pay higher interest rates.
How do you know if a foreclosure is the right one for you?
Bank owned properties (REO) usually have taken care of outstanding liens before they obtained the property and put them back on the market. But "buyer beware" of unpaid liens, including outstanding mortgage debt, taxes, construction loans, tax liens etc. Some auctions are not as generous and buyers must do their homework, sometimes outstanding liens and fees could be transferred to the new owners.
Now you have identified the right property, what kind of offer do I make?
Remember it takes money to make money, and cash buyers rule. If you are going to make an offer on a already low priced property that is bank owned, do not try to lowball the offer because if it is a good deal for you, it is also a good deal for someone else and it is already priced low..and chances are the cash investors will get first consideration. Make your offer competitive!
Stay tuned for Part Two of what you need to know to buy a foreclosure!