Top 5 tips to consider before Bargain Shopping your next home
Are you in search of bargain properties including foreclosures, short sales, estate sales, Sheriffs sales & distressed properties? There are great deals available for those who are prepared to pursue these often difficult transactions. Here are a few important items to consider before stepping into this unpredictable process.
1. When it comes to distressed properties, attitude and commitment are everything.
Not many buyers are prepared to "give it their all" with no guarantee of success. The first thing that must be present to purchase distressed properties is a care-free attitude toward results combined with a strong commitment to perform on demand. Unlike traditional purchases, distressed properties can bring a real roller-coaster ride to real estate transactions. The buyer must understand that the holding entity of each property is behind the wheel & is held to undisclosed criteria. There is only one guarantee on these deals...no two transactions will ever be the same.
2. Doing a bit of homework on the type of sale and status of the occupants or previous owners can save a lot of time.
Distressed properties come in a variety of forms depending upon how they were given to distress and the type of lender involved in the original purchase. The Veterans Administration, (VA) deals with their distressed properties differently than Fannie Mae or Freddy Mac. Some properties are simply abandoned by the owners while others continue to be occupied during and after the foreclosure process. The occupants or previous owners can have a bearing on how the transaction develops. Estate sales can be problematic and include negotiating with the influence of multiple family members as well as their Attorneys.
3. Be certain that you are on the right time frame.
The number one cause of distressed home purchase failure is the duration of time required to finish the transaction. Many buyers begin the process with high hopes of a great deal which can leave many buyers disillusioned when the transaction is still in process six months later. The best policy for distressed home purchases is to not apply a time frame to the transaction. Most transactions take a minimum of at least six months to complete. Many purchases have taken over a year to complete. If you are a buyer on a tight time frame to purchase a distressed property is not the best home for you to target.
4. Plan to play a larger role in your transaction.
While agents, title officers, and lenders will play a significant role in your purchase of distressed properties the buyer will also benefit from tracking the progress. As each sale is different, information becomes crucial in the process. Maintaining a good reading on the holding entity can save a lot of time and energy. Holding entities are under no obligation to communicate their future intentions on their distressed properties. Certain red flags that develop from the transaction could be good reason to move along.
5. Exceptions: Some exceptions to the typical distressed sales do exist.
When a distressed property has fully run its course, the original owners are no longer legally connected to the property and most encumbrances have been removed. The property is then fairly easily purchased directly from the holding entity. These homes are available in limited supply and are discounted accordingly. Once a holding entity has paid attorney’s fees, vacated all occupants, completed repairs, & hired a local listing agent the home is ready for purchase. Most of the discount is applied as the holding entity offers the home in "as is" condition with zero legal recourse. In other words, high personal risk in exchange for the discount. Home inspections are critical in this type purchase to determine the condition of the property. Any future issues are the sole responsibility of the buyer. The benefits of these bank owned property’s is that they can usually be completed within the typical 30 day time frame at a reasonable discount.
A bit of Caution: Real estate auctions have risen in popularity since the economic fallout and with the amount of distressed properties available. It's worth a look at the various types of auctions being advertised today and what they actually offer. Not all auctions offer the same opportunities for buyers. “Buyer Beware” applies here.
Michael has been involved in multiple distressed property purchases and sales including short sales, auctions, foreclosures, title encumbrances, abandonment, and personal crisis sales situations. His insight and knowledge brings an advantage few have to offer on these type transactions. If you have interest in purchasing distressed properties for personal or investment purposes contact Michael today at (208) 661-1869