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How to Buy a Foreclosure

13th June 2011
By Homeencounter in Real Estate Law
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First off, today is a very different market than it was in 2004. Back then, you qualified to help someone buy a home if you had a real estate license and a pulse. Those same part-time Realtors are still out there, but they're even more destructive now than they were then, and they can get you into a heap of trouble. So find a Realtor who knows about REOs - a real estate agent who specializes in foreclosures - who can help you navigate the shark-infested waters that surround foreclosure properties.

A good real estate agent like you can find at Home Encounter will save you hours of frustration and thousands of dollars because they know the tricks behind buying foreclosure properties. Like:

1. Cash is king. It's always best to pay cash for a foreclosure. If the house you're interested in is priced at more than $100,000, then it's not that big of a deal, but in the sub-$100,000 price threshold, you're going to face stiff competition from cash buyers. So if you're coming to the table with financing, make you've at least got 20% to put down, and be ready for a lot of rejection.

2. Escrow makes all the difference. Want to be perceived as a serious buyer? Be prepared to offer up to 10% of the purchase price as earnest money. Don't worry - as long as you have an inspection contingency, you can cancel the contract for inspection-related reasons and not forfeit your escrow. But a buyer who is willing to put their money where their mouth is - even if it is refundable money - will always have a better chance of winning the bid.

3. Inspections are short. None of this 10-day inspection business. Get your REO inspected fast - within 5 days of contract effective date. The bank will probably still give you 10 days to inspect, but you look much more prepared when you're willing to complete your due-diligence in 5-days than the guy who needs two weeks to get the same job done. What on earth would take him this long to inspect, anyway? Home inspectors aren't the busiest people in the world these days.

4. Don't change your mind. Try not to ask the change the major tenants of your first offer: the buyer's name, the inspection period, the purchase method, the contract price, etc. When you do, you appear wishy-washy, and an institutional seller only wants to do business with people who know what they want.

5. Be easy to work with. No one wants to work with someone who is aggressive and difficult. They want someone who will submit their entire offer in one emailed file (no one faxes these days); who won't nag them for a status update every few hours; who recognizes that the bank is open banker's hours and won't have an answer for them on Saturday; who understands that the seller's agent is processing lots of offers - not just theirs - and may need some time to respond.

6. Be represented. Some foreclosure agents want to keep all the commission on the sale, but these days REO brokers want to have a hassle-free experience, and they know they won't get this if you're a novice buyer representing yourself. So find a great real estate agent who understands all the things I've just written; get them your team; and have them do the work of buying and selling foreclosure properties for you.
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