Typically foreclosures are a very good buy. They’re priced to sell, so you (the buyer) are most likely to get a great deal IF you and your real estate agent are knowledgeable about the procedures and the pitfalls you’re likely to face.
I see it happen all the time. Buyers especially are not aware of how different REO’s are from regular homeowner re-sales. Here are some things to keep in mind:
1. The bank or foreclosure company rules. They will dictate how the process will evolve.
2. The bank will look at offers based on their offer process. Don’t be surprised if they will not look at an offer while another is being negotiated. If they do decide to look at your offer while another offer is in the negotiating stage, they will ask for your “highest and best offer”.
3. Be sure you have ALL addendums and documentation, such as Lender Approval Letter. Keep in mind that many banks will require that you be approved by their lender prior to making an offer. They will require proof of funds.
4. Follow all instructions to the letter.
5. Be sure to read your contract carefully…especially as it regards to earnest money and phrases like “seller can unilaterally terminate for any reason”. Banks can and will do what is in their best interest.
6. Both you and your real estate agent should pay close attention to any time sensitive items regarding the contract.
7. You’ll need to keep on top of every step from offer to closing. If issues arise such as lender required repairs, let the seller know immediately.
8. You should have a cash reserve ready as foreclosures may have up-front costs, such as utility turn on and other miscellaneous items. You will not be refunded any out of pocket expenses used during the process.
Foreclosures are not for the faint of heart. It’s truly a gamble, but the gamble can pay off (big time) for you if you have patience and determination. Good luck!
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