buying a foreclosure

Foreclosures: Finding Funds For Investing

Finding funds for investing in foreclosuresThere are many different ways to secure funds for foreclosure investing. Many of the top investors have their own money allotments for foreclosures, or a tight relationship with a bank who views them as a small business. While this is great for the seasoned investors, where does that leave the new investors in the market? Let’s take a look at some popular funding options for buying foreclosed homes.

Buyer

Many times, when investing in foreclosures, you do not even need to have a bank loan, you just need to be able to identify a suitable buyer for the property that is willing to pay the right price. This makes it easy to find and buy foreclosure investment properties if you can find a buyer beforehand. Remember to have a contract and pre-approval for the buyer’s bank loan so, if they change their mind after the bid has ended, the full amount of the property does not come back to rest on your shoulders.

Having a buyer lined up will take a lot of stress off of you and will make the process run a little smoother than normal. Banks will not look for as much information from you in order to get funding approved and the banks will see another full-time buyer, which puts them at ease.

Banks

If you don’t have a buyer lined up, or you plan on buying the foreclosure for your own benefit, possibly for a rental property, then you will need to secure funding yourself from a bank if necessary. It is important to find the right bank and is usually a good idea to work with a foreclosure real estate broker for the first time or two in order to feel your way through the banking market.

Once you have flipped a few foreclosures or are actively paying on one rental property when you decide to purchase another, it will be a good idea to know a few people on the inside of the foreclosure financing department at the bank. It is also a good idea to buy down as much of the interest rate as possible or start out by choosing a bank with an extremely low interest rate to begin with. Having the low rate will help your payments and keep you in check with your budget.

Grants

Believe it or not, there are government grants out there that help investors buy foreclosed homes. The reason these grants are out there is because the government feels that a foreclosed home that has been flipped often provides affordable, quality rental housing for low-income families.

There is a specific program called the Rental Rehab program which is a forgiveness loan, which means the program finances up to 50% of the total foreclosure rehab costs. While this does not secure the full amount for the foreclosure, it is just another way to keep your budget in check when looking for available financing.

There are plenty of ways to secure funding for foreclosed homes. The key is being diligent in your search and seeking out the best deal. While having a buyer pre-approved is a great thing, it also helps to have a banking mortgage finance guru on your side as well. If all else fails, government grants are a great way to keep investing if you don’t mind the paperwork on the front end.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Buying A Foreclosed Home

Foreclosure begins when a property owner defaults on the mortgage of a property, mainly due to financial difficulties or the inability to keep up with the mortgage payments. In the event a property succumbs to a foreclosure, it’s likely that the property has not been maintained as it should have been. This means perhaps the roof is in dire need of repair, there could be a damaged foundation or the landscaping has been severely neglected, or a number of other maintenance or repair issues may exist.

Some foreclosure homes may only need a fair amount of TLC. The amount of repairs needed or required for the foreclosed property may greatly reflect on the asking price. A major fixer upper may be offered at a lower than normal price, whereas a property in fair condition may go for a price just below the market value.

When a mortgage lending institution decides to foreclose on a property, they will file a notice of default which becomes a public record for all buyers who are interested in locating foreclosed properties for purchase. There are many places buyers can look to find foreclosed properties such as: various web sites on the Internet, real estate agents or brokers and real estate magazines.

Once the buyer locates a foreclosed property they are interested in, the buyer can assess the public records and check for any liens on the property. Most liens that are placed on foreclosed properties are for unpaid taxes. Interested buyers should also check the values of the neighboring properties before entering into a contract to make sure they would be getting a fair market value.

Novice buyers may be interested in checking out bank owned foreclosure properties. These bank owned foreclosure properties may prove to be at lower risks to the novice buyer. With bank owned foreclosure properties, there are usually no tenants to evict, no liens against the property and no past due taxes.

Some lending institutions may be eager to sell their foreclosed properties and may offer to finance the foreclosed property to the buyer at a low market rate or with a small down payment. If the lending institution has already done an appraisal, the interested buyer may not have to pay an additional appraisal fee. Most lending institutions that are eager to sell a foreclosed property may also include title insurance that generally removes most of the risks that come with buying properties early on in the foreclosure process.

The more experienced buyer may decide to find a pre-foreclosure property owner about to go into default and offer to buy the property for a portion of the difference between the property equity and the market value. This may be an acceptable offer to a property owner who doesn’t want to end up losing all of the equity that has been invested in the property. Some pre-foreclosure property owners may offer bargains to a persistent buyer. This is mostly because at this stage, credit collection agencies are constantly hounding the property owners, who would in turn want to resolve these issues to avoid any further harassment.

Buyers may sometimes find that contacting the owner of a pre-foreclosed property can be difficult. Usually by this time, the property owner may not have any electricity or a telephone. Sometimes these pre-foreclosed property owners may also be difficult to deal with directly, due to a drug or alcohol addiction that put them in their situation in the first place. Some owners may also be hostile to the buyer or unpleasant to deal with because they are bitter and frightened about losing their home and perhaps they have no other place to go. Some of these owners may even see the buyers of their foreclosed properties as their mortal enemy and may do some extra damage to the foreclosed property before evacuating the premises.

Many foreclosed properties are normally sold at prices close to the assessed value. Depending on what city or neighborhood the buyer is interested in, what the neighboring property values are, how long it has been on the market  and what amount of work needs to be done to the foreclosed property will greatly reflect on the asking price.

We’d love it if you would voice your opinion on this article on buying a foreclosed home.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Home Inspections on a Foreclosure

Inspections of foreclosed homes present a particular challenge. Often, there is no source of water, no source of electricity, and no source of heat or air-conditioning. These conditions inhibit a full and comprehensive inspection of the home. Of course, the primary aspect of the home inspection is still the verification of the structural integrity.

Typically, bank owned properties are sold as is and the bank is typically unwilling to have non-functional systems made functional for the home inspection. Therefore, buying a home in foreclosure under these conditions is similar to buying a used car without the opportunity to drive the car.

Typically, foreclosed homes as well as homes sold in a short sale have deferred maintenance resulting in degraded conditions in the home. Foreclosed homes often have defects not typically found during a typical home inspection. These defects include pipe leaks which may result in the growth of mold/mildew, cracked, broken and clogged pipes, non-functioning water heaters, non-functioning heating systems, and non-functioning air-conditioning systems. Other problems more likely to be found are do it yourself expedient repairs which can sometimes result in hazardous conditions such as electrical hazards.

Finally, in foreclosed homes there may be removed components or even intentionally damaged components. Therefore, the inspection of a foreclosed home, or a home being sold in a short sale, is even more important than the inspection of a home under normal conditions. The fact that bank owned properties are not typically open for price renegotiation based upon issues found during the home inspection is not a wise reason for relinquishing your right to have a home inspection.

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Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.