Buy A Foreclosure Home

If you are in the market to invest in a home, you are in one of the strongest buyer’s market in more than a decade. As prices drop and more homes sit on the market, ready purchasers have the upper hand. We are not promoting going out and buying 15 properties for “no money down.” What we’re addressing genuine purchasers seeking to purchase a new house to live in, with reasonable credit and a reasonable amount of money down. Both sellers and mortgagors are looking for these purchasers, and the buyer has all of the options.

In this market, the sellers and mortgage companies are hunting for buyers, and the buyers have strength.

Plenty of Options in a Down Market

In a slow market, the home purchaser has a wide range of options. From 2002 to 2004, buyers were driving up prices to purchase houses, often setting off bidding wars on homes for sale within hours of the initial showing. Fast forward to 2008 where thousands homes for sale stay with no buyers for months – even years where before a home buyer is found.

Today, the home purchaser has far less competition. He can calmly look at dozens homes to pick the one that best suits the needs. With extremely low rates, she also has the option to borrow from the current home, (assuming sufficient equity) to renovate or expand. Still others are sitting on the sidelines, to see if prices continue to drop, if making a buying decision.

Purchasers Are In Charge

With a wide range of sellers and few buyers, the purchasers have the leverage. Home sellers are getting far fewer offers than ever before. Good quality residential real estate will generally sell, but at a little price. Poor quality real estate may not choose a purchaser at all. A solid offer – with a reasonable down payment and little mortgage risk where is very enticing to the seller.

What Should You Offer?

This is always a hard question to ask. Ideally, you want to bid as little as possible so that you are able to get the home at the best price. However, we do not advocate walking in to a $500,000 home and low-balling $200,000. The seller will likely ask you to leave, not consider any other offers you may present and the seller’s real estate broker will remember you – especially if you try to another of his clients’ listings.

Evaluate the Home to Decide What it is Really Worth

Before making an offer, you should truly sit down with a pen and paper and think about how much this house is really worth. How does it compare to other homes currently with no buyers? How does it compare to houses that have sold in the last 6 months? Compare both the type and size of the home as well as the location; a 4 bedroom home on option side of town may be valued differently than a 4 bedroom home on the other side of town. Use a free reference guide, such as HomeBuyersGuide.com to help you assess the area as well as each home you visit.

You Must Use a New Home Inspector

While you do not have to, it would be crazy to make a residential real estate purchase without using a home inspector or engineer (unless you are personally qualified). They are not falling in love with this home; they have no emotional attachment. They can evaluate it objectively and identify all of the problems. They may be able to provide you with guidance to the rough cost to make essential and non-essential repairs to the home.

Do You Want to Live Here the Next 10 Years?

People bought houses speculatively from 2002-2006, leading to the problem in the real estate market today. These purchasers drove up costs, are now struggling with multiple houses and, often, are turning to bankruptcy. You should not expect to be able to get out of this house in the near future. Be sure you really want to be here.

Give them a Clear Offer

There are essentially two kinds of offers you can make when looking to purchase a home:

Low Ball Offer where here, you coming in below fair market with an bid on the home. Even factoring in repairs, comparable sales and other items, you are still underpricing on the home. If the seller is distressed, the house has been on the market for an extended period of time or the seller no longer resides in the home, you may have a chance with a low ball bid. Keep in mind where it is option thing to come in with a low offer; it is an entirely different circumstance to insult the seller.

Reasonable Offer – here, you have considered recent prices, defects and necessary repairs required, comparable prices, how long the home has been on the market and the current market in your area. Adjust the price lower if it is a slow market; this is not the same as the low-ball which may be 20-50% below reasonable prices. You need to address:

Offer amount

Explanations why you are offering less

Expected closing date

The percentage you will be putting down as a deposit

What amount you will be paying towards the price

The percentage you look to pay through a mortgage

Many home sellers could take slightly lower offers from purchasers who are offering all cash or 30% down subject to a 70% mortgage, as opposed to a higher offer where the home buyer wants to put “no money down” and get a mortgage for the entire purchase price. The first will stand a better chance of actually following through and buying.

Summary

Sadly, the nation is in a significant down market in the residential real estate industry. However, this creates opportunity for buyers. If you are able to benefit as a buyerin this market, you are in the driver’s seat. You will have your choice of houses and will be able to pick great values.