Maybe you’ve heard about people making a living buying and selling foreclosures. It isn’t something you want to just jump into. There are processes and strategies that are far different than buying a regular home off the MLS.
This article will let tell you what you need to know about working with the banks and how to buy foreclosures in Portland.
What Type of Foreclosure Do You Want To Buy?
When considering purchasing a foreclosed property, it’s essential to understand the different types of foreclosures and tailor your strategy accordingly. Here are the three stages of foreclosure, each requiring a distinct approach:
- Pre-Foreclosure (Short Sale): During this stage, homeowners are still in possession of the property and may attempt to sell it to avoid losing it to the bank. These sellers are often motivated to recoup what they owe to the bank. As a buyer, you have the opportunity to strike a favorable deal while assisting the homeowner in preventing severe damage to their credit. However, time is usually limited before the bank intervenes.
- Public Auction: Once a property moves out of the pre-foreclosure phase, it may go up for a public auction. While some auctions now take place online, others still occur in person, often on the courthouse steps. Purchasing a home at auction carries both risks and rewards. The bank can only recover the amount owed, which means there is potential to secure a great deal and pay a fraction of the home’s actual value. However, it’s important to note that auctioned homes are sold “as-is,” and without a thorough inspection, there may be hidden repair issues or existing liens.
- Bank Owned REO (Real Estate Owned): This is the most common type of foreclosure and often presents the easiest way to purchase a foreclosed property. Banks aim to quickly remove these properties from their books, but they generally price them close to market value. While good deals can still be found, it’s crucial to consider the costs of repairs and ongoing maintenance to ensure they don’t outweigh the benefits of the deal.
Understanding these foreclosure types enables you to tailor your approach based on your risk tolerance, available resources, and investment goals. Conducting thorough inspections and research, consulting with professionals experienced in foreclosure transactions, and carefully evaluating the financial implications will help you make informed decisions and maximize the potential value of your foreclosure purchase.
Work With A Pro
If you are in the market to buy a home for yourself or your family, and you want to find the best opportunities, you will want to work with a licensed realtor. They can help you to work with the bank, set your terms and navigate the process of purchasing foreclosed properties.
They can help you find deals as they become available, and help to steer you away from homes with potential problems.
However, at the end of the day, you are ultimately responsible for the home you buy. This is why you will want to have your own, independent inspection done if possible.
If you are looking to buy a foreclosure for a fast flip, you might want to think about partnering with a seasoned investor who can show you the ropes, or work with a company like PDX Home Buyers who can help guide you throughout the entire process.
Get Your Financing In Order
Ensuring your financing is in order is a crucial step when considering the purchase of a foreclosure property. Depending on the specific home, obtaining traditional financing may present additional challenges that you need to navigate. Banks are risk-averse and rely on property appraisals to determine the loan amount. In the case of a low appraisal, securing the desired loan may become difficult. It is worth noting that many buyers in the foreclosure market opt for cash transactions to streamline the process.
Submitting a cash offer can expedite the purchase by eliminating the need for additional red tape associated with traditional financing from a bank. Cash offers are particularly prevalent among foreclosure investors, intensifying the competition for these properties. By offering cash, you position yourself as a more attractive buyer, potentially gaining a competitive advantage in the market.
However, it’s important to assess your own financial capabilities and evaluate the benefits and drawbacks of a cash purchase. While it offers advantages in terms of speed and simplification, it may also tie up a significant portion of your funds and limit your liquidity. Exploring various financing options, consulting with mortgage lenders, or working with experienced real estate professionals can help you determine the most suitable financing approach for your foreclosure purchase.
Additionally, it is advisable to be prepared with the necessary documentation and financial proof to demonstrate your readiness as a buyer, regardless of the financing method you choose. This can help instill confidence in the seller and improve your chances of securing the property.
By being proactive in getting your financing in order, whether through cash reserves or traditional loan options, you position yourself for a smoother transaction and increase your chances of successfully acquiring a desirable foreclosure property in a competitive market.
Making Your Offer
Know your limits. Sure, you might pay a bit more if you are trying to buy a home you want to live in for the next 50 years. But if you are only looking to flip, you will not want to pay a dime more than you have to.
You must have predetermined price guidelines you stick to. You are better off losing a deal than losing money. The banks will often ask you to submit your “highest & best” offer.
In essence, this is the bank, asking for all interested parties to submit their maximum bid. If you’ve ever bought anything on eBay, you’ll know those last few seconds, trying to get the highest price can be invigorating and stressful!
Don’t get caught up trying to outbid what you think your competitors will offer. Stick to your price, and walk away if you have to.