Are you looking to get a deal on a foreclosure home?
Rich Kruse, Gryphon USA, October 22, 2020
As real estate buyers look for deals, many are looking to foreclosures for their next home or investment property. And, due to job loss created by Covid 19, the expectation is that many more foreclosure properties will soon be available.
If you are interested in buying at a foreclosure auction, here are a few things you should know:
How to find foreclosure properties:
You can start with a Google Search using words like foreclosure, foreclosure auction, bank owned real estate or REO, plus a geographic location. There are also websites that list foreclosure properties for sale and auction such as GryphopnUSA.com, Auction.com or Hubzu. Some other resources are RealtyTrac or Foreclosure.com. Additionally, a local real estate agent specializing in bank owned property can help. Again, you can start with Google and go from there.
Making the purchase:
There are a few ways a buyer can purchase a foreclosure property.
First, if you find a property is in foreclosure but the judicial sale has not yet been conducted, you can negotiate directly with the owner and complete a sale with them.
Second, you can find properties that are being offered by the county sheriff and bid “on the courthouse steps”, although many states are now moving to online auctions. The opportunity for a deal exists but there is also risk. If you want to go this route, be prepared to put up a non-refundable deposit and many times you will need to close the sale without the benefit of conducting an interior inspection. In some instances, you will also need to evict the occupant if they refuse to leave once you take ownership. Additionally, these offerings do not always guarantee a transfer of title free and clear of liens. It is the buyer’s responsibility to look through the courthouse file or have a title search run to satisfy themselves that title will be clear.
Lastly, you can buy property from the bank after the foreclosure auction is completed. These properties are known as REO or Real Estate Owned. Homes are listed with real estate agents, are usually vacant and can be inspected before you finalize the purchase most of the time. Remember that even though you can do inspections, it is common for these properties to be sold “as-is” and require repairs that the seller is not likely to make. However, since you now have interior access it is easier to complete the transaction using financing options.
Is buying a foreclosure or REO property different than buying non-foreclosure property?
Absolutely. There are quirks in every process and this one is no different. Even if you are a savvy investor you can still make mistakes. If you go the route of buying at auction, make sure you read through the terms of sale and get a copy of the contract you will be expected to sign before you bid. While you can go solo, consider hiring an agent. Working with a real estate agent who specializes in foreclosures can be a huge time-saver.
Keep in mind foreclosure purchases in general aren’t always easy and there may be additional expenses involved.
The low initial price does not include possible repairs such as roof, electrical or structural problems. If possible, make sure to get a home inspection. If that is not possible, be conservative in your estimates of repair especially if you are not a seasoned investor – and realize even seasoned investors make mistakes sometimes!
Also know that ALL properties these days are in demand and other people are looking to get a deal with a foreclosure property too. It is not as easy as it used to be.
And – Here is a pro tip that has made a lot of people a lot of money over the years even though it might drive your real estate agent crazy. If you spend the time and energy looking at the asset and evaluating the opportunity. MAKE AN OFFER, regardless of how crazy you think it might be. You never know when it will be accepted.
-Rich Kruse, https://www.gryphonusa.com/