| Myrtle Beach Foreclosures - Things You Need To Know When Buying |
 |
 |
 |
| Written by David Brennan |
| Thursday, 28 January 2010 20:43 |
|
Here are some of the things you need to know before buying foreclosure. This is the straight-up truth on how to buy a foreclosure! If you want to be successful, you have to take it slowly but surely. You have to prepare yourself but knowing how real estate investing works and know the facts, methods, and strategies that can aid you to success.
Here are some of the things you need to know before buying foreclosure. This is the straight-up truth on how to buy a foreclosure! If you want to be successful, you have to take it slowly but surely. You have to prepare yourself but knowing how real estate investing works and know the facts, methods, and strategies that can aid you to success. HERE ARE THE 5 MOST IMPORTANT AND NECESSARY THINGS YOU NEED TO KNOW. ALL FORECLOSURES ARE NOT THE SAME! There are several different ways to buy foreclosures along with the different types that are available. Buying property at a foreclosure sale at your courthouse is NOT the same as buying from the seller directly. Buying a foreclosure at a tax auction is NOT the same as using a realtor to negotiate a foreclosure that's listed with a real estate office. Statistics for these different kinds of foreclosure purchases vary greatly. In addition to that, just because you get a foreclosure at a lower reduced price doesn't necessarily mean you are going to make a huge return on your money. You have to decide what kind of foreclosure you are going to purchase. Every type of foreclosure has a different process about how to obtain that property. Also, your research method, procedures on negotiating and your time frame vary for each different type of foreclosure. The easiest and best way to purchase a foreclosure is when it has been listed with a real estate company. In a nutshell, what this means the foreclosure process is already been done for you. Any title problems have been corrected, and the property is ready to purchase without any liability. The best part about all this is you really didn't have to do any research. If you are looking for foreclosures in the newspaper, be careful about whom you are talking to. A professional real estate company under law must supply their office name in the ad. You should be leery about no office name or representation. This could be an investor that has already purchased a foreclosure and is "flipping" it to you. There is nothing wrong with this at all, except YOU won't be getting that great low price because he's just added 15k-30k onto his purchase price and that's no deal for you! BUY IT FROM A REALTOR who works at an office that specializes in foreclosures. Most foreclosures, even local bank owned properties (REOs), as well as Fannie Mae and Freddie Mac, list their properties with real estate offices. Even if you contact the sellers thinking they might sell to you directly for a lower price, they will refer you to the listing office. They obligated to pay the real estate company when it is listed with them. Save yourself time, and find the office in your area that sells mostly foreclosures. They have the experience you will need to help you get the one you want. Recommendation: ** Don't use ANY realtor, qualify them the same way they will qualify you as a buyer. If they haven't closed more than 10 foreclosures, don't use them. Their inexperience can cost you the property you wanted. You need to work with an experienced real estate foreclosure specialist. This will give you an advantage over your buyers. CASH WILL NOT GET YOU A BETTER DEAL! One of the sumpreme misleading notions about acquiring foreclosures is that cash will guarantee that you get the property, or that it will get you the property for .50 cents on the dollar. When you make a cash offer, does it make the offer stronger? Completely! Does it mean that you just won? Not at all. More than likely these properties are regularly listed below fair market value, investors flock to them, watch them, put together multiple offers on them in the hopes one will go through. Being a investor, your competition is other investors. Those other investors are making cash offers too! As an real estate investor, a cash deal will not bring you a very low price and a QUICK closing will. If you are a homeowner searching for a great deal, you can finance a foreclosure without paying cash. The mass of them are actually financed, so your offer doesn't get put on the bottom of the pile because you want or need to get a mortgage. What's your advantage over the investor that is making an offer on the one you want? YOU will be using it as a primary residence vs. investment. The sellers of foreclosed properties would rather sell to someone that will live in the home not buy it for investment reasons. Primary homeowners care for their investment better than absentee landlords and renters. This will get you a better deal: a realistic offer, starting at least 10% below asking price, a quick close (2-4 weeks), agree to purchase it AS IS after a fast home inspection. A recommendation for you is that your home inspection is for your information purposes only. You do the inspection so that you know what needs to be repaired if anything after you close, do not use it as a bargaining tool after you and the seller have agreed on price. That is NOT what it is used for. EVERY SELLER IS DIFFERENT AND EVERY SITUATION IS NOT THE SAME! Just as you acquire each property in a another way, for a diverse reason, and sell in a dissimilar way for a different reason, so to does the seller of a foreclosure. The only thing that remains a steady is that the foreclosing bank takes back possession of a property and then gets a real estate office to market it for them. Numerous times the bank will hire an Asset Management company to process all of the foreclosures. Then they turn around an hire a real estate office to market them. The resemblance stop here. To make it easy for you, the term "Seller" will include all government backers such as HUD, FNMA, VA and FRMC, banks and asset management companies. Each seller, and there are thousands, have their policies on how to promote their foreclosures,how to close on them , some even require the purchaser use the sellers attorney and how to negotiate. Some sellers consent to repairs, some don't, some charge a daily fine (per diem) if you don't or can't close on when you are required to, some will negotiate that fine and some don't charge at all. A handful of sellers won't even look at offers until the property has been listed with a real estate office for a minimum of 14 days. ersistence and alot of patience play a vital role in negotiating for the property. If you want to get the property you must follow the seller's requests and policies. The bulk of the paperwork or procedures probably won't even make sense to you. Just like any other business, procedures and policies are present for a reason. You will realize what I'm talking about, and will sign what you need to sign. You will probably be asked to come in and sign another 2 weeks later, and another 1 week later. DON'T GET FRUSTRATED. Being perturbed and outraged won't make you money. A suggestion is to just think about the upgrades and changes you will make with this property once it closes. Also, think about the profit you will make. The seller may reply to your offer in 3 days, it may be 4 weeks. One aspect of our society is we live in a world of instant gratification. You need detach yourself from the outcome in a way (very difficult for many people) and say to yourself it is going to happen and it is on its way. Also, you being extremely patient will get you the property because numerous other buyers will get frustrated, angry and move on to something else. Don't force the seller to answer to your offer in 24 hours. Don't walk away from your offer because the seller after 11 days still hasn't responded. You will lose and regret that someone else will get that deal because they were more prepared to be tolerant and follow the rules. Policies of different sellers like price reductions, price setting and negotiating are also very different in every transaction. Sellers start at fair market, some below, some well below fair market. Also, some negotiate better than others, some will reduce prices by 30,000, others only in 5,000 increments. Various sellers list it and let it sit Your realtor can't tell you who negotiates better than others, or which seller is likely to take a lot less because each property is being sold under different state of affairs. Figure the thousands of diverse sellers and multiply that by hundred thousand give or take foreclosures nationwide it's an impossibility to figure out which one of those is going to sell at 50% of list price. FORECLOSURES ARE NOT SOLD FOR WHAT THE PAYOFF WAS ON THE OLD MORTGAGE This is what happens. First, that the bank gets a recent updated appraisal. The bank needs to know what the fair market value is of the property based on its existing condition. A house resides in a $170,000 neighborhood. The owner bought 12 months ago and put $50,000 down on the property when he purchased it. His bank forecloses for amount of $120,000. The house is in perfect condition in a well-desired area where property is selling in about 45 days or less because of the demand. A real estate office lists the house for $162,000. You learn that the old mortgage was only $120,000 so you offer $130,000. You calculated in the real estate fee and a few extra thousand for the seller. If you start out your real estate investing career with this kind of thinking, then you will be unsuccessful. You acquiring the property are very slim and the odds are definitely against you. If you feel the house is not worth more than $130,000, then offer $130,000. If the house is worth every penny of $162,000 then offer in the low-mid 160's if you want a chance of getting it! One important you need to realize. Banks are in the business to make money and prosper as it's okay for you to walk away on a buying it and saving thousands. If you use the method of offering in the first situation to this case, based on the balance of the first mortgage you would offer 152,500 plus realtor fee, plus a little extra for the seller. The seller would be very happy to accept an offer of $162,000! In a nutshell, the balance of the mortgage that was foreclosed on really is unrelated when it comes to buying of the property. Tip: The value of real estate is set by you, the consumer. It is not determined by your next door neighbor, your realtor, or the seller. Find out and calculate what its worth to you and that price will not be same for everyone. One investor may be willing to pay $60,000 for a property, another $90,000 for the same property. So what is the true value? Is it worth $90,000, or is it only worth $60,000? The answer is it's worth $50 to the one investor, and it's worth $85k to the other. You have to be emotionally and financially prepared to buy! Let me say that again, you must be emotionally and financially prepared to buy! If you know you will be financing your foreclosure, then go get prequalified and build that relationship with your lender. Don't bother driving around looking for them, hanging out at the auction or researching the one down the street. Sellers especially bank owned sellers will not respond to any offer that does not come with a pre-qualification letter from a bank or mortgage broker! Don't set yourself for more stress and aggravation by doing it out of sequence. First, go get a pre-approval right away, then start searching for that property. Most pre-approval letters are generally valid for 90 days. **Very essential tip: Before you apply, let your lender know that you will be buying a foreclosure. The principle of this is if the property requires any work, even if it is very minor work such as a door being replaced, most sellers will not allow the work to be done before closing. This can cause a challenge if the lender won't release funds until the repairs are made. This can not and will not be negotiable on the seller's side, so make sure your bankis aware that you purchase AS IS, and repairs will take place after closing. If they tell you they can't, say thank you for your time, and go pursue another lender that will. There are several lenders out there that will! You want to avoid getting a "false" pre-approval because the lender doesn't have all the information they need to give you a loan. If you are a cash purchaser, you need to include with your offer a letter from your bank or brokerage firm stating you have cash funds available for the purchase. This is standard practice and applies to ALL cash investors so don't be offended. The seller doesn't want to know how much is in your account, just that you have your money available to purchase. As a investor, you should bring your checkbook when you go to look at the foreclosure with your realtor. This is part of being prepared. If the house is what you want, and the numbers work for you as an investor, make an offer right then and give an earnest money deposit. Believe it or not, property is lost overnight! I have seen this happen way several times. You might be going through the property on Monday at 10am. The 2 other people that looked at it over the weekend might be sitting in an office signing offers or they might not. Either way, you want the advantage without any competition. Being swift and fast is the name of the game when it comes to winning those deals like foreclosures. If your realtor came prepared with all the paperwork needed to offer and you are organized and ready, you can get it signed, presented and maybe accepted while those other 2 people are still "contemplating about it", or hysterically rushing around trying to get a pre-approval letter in one day. BE PREPARED AND READY TO GO! DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. If you would like more knowledge about this theme or need some guidance when it comes to foreclosures. In addition to that, if you would like a list on some of the best foreclosures in the Myrtle Beach area, click here. Free Myrtle Beach Foreclosure List |