Foreclosures Real Estate
Investors have long been buyers of foreclosure properties to fix up and rent or sell for a profit. With the advent of HGTV and the DIY channel they have become quite popular for owner occupants as well in recent years. They can be GREAT buys if you buy them right and know what you’re getting into. They also can be a money-sucking-no-fun-at-all-why-in-the-world-did-we-do-this catastrophe. How do you know what a good decision is? Read this article (duh.) and then call a local real estate expert.
There are several different types of foreclosures that we’ll explain here in brief:
REO (Real Estate Owned): These homes are owned by a bank locally or nationally. Many will be written on typical real estate contracts that individually owned homes would be. Typically these are open to everyone from the day they hit the market on including, investors, government organizations, and individuals.
HUD (Housing and Urban Development): These houses are government owned and thankfully (For owner-occupants) they are usually only open to people who plan to live in them for the first 15 days on the market. No investors or non-profits can make a bid during that “Exclusive” period. HUD has a mission to increase home ownership in the US and one of the ways they do that is to give those planning to live in the property the first shot at buying it. (Tip: get your search set up for these so that you are the first to know about them!) The HUD offer process is pretty simple, but the contract you’ll sign to lock up the property if you win the bid is pretty long so get your signing and initialing hand ready. Investors buying in cash should be aware that you’ll need to have no more than a 30 day closing.
VA (Veterans Administration): You guessed it. These are homes that were bought with a VA loan and unfortunately fell into foreclosure. The VA has their own contract to write an offer on and extra paperwork. Unlike buying a house from an individual where the buyer chooses the title company and closing company, the VA takes their pick and you’ve just gotta live with it. Who knows? Our best estimation is that it’s still technically their house and they just aren’t that concerned with who your favorite title company is.
FNMA/FDMC (Fannie Mae/Freddie Mac): Some mega-loan service (or lack there of) companies have their own paperwork and rules to follow when buying one of their properties and Fannie/Freddie are some of the biggest offenders. Your real estate expert will know the ins and outs of the contract and will be able to explain what you’re looking at in better detail to you. Like the VA foreclosures the closing company is chosen by Fannie Mae or Freddie Mac.
Regardless of who the seller is when you buy a foreclosure make sure that you keep in mind these things:
1. They’re not going to do any repairs. “As-is, where is” is the motto. Make sure that you go through with a fine tooth comb to find any and all necessary fixed and faults before you commit to buying.
2. You’re dealing with (at best) computers that are crunching numbers and (at worst) humorless, compassionless, ultra-corporate types halfway across the country who are usually so swamped with work that they don’t have time to hear a sob story or a pity party. So, get everything your agent asks for as fast as you can to make your foreclosure buying process easier. They won’t forget that they asked for it and will very rarely make an extension for you to have more time to get whatever it is that they were wanting.
3. Not all foreclosures are good deals. Read our blog post on tips for buying foreclosures and make sure that the costs of the home and repairs needed to get it back up to market value aren’t going to add up to what an already fixed up property would be worth!
Still in for the journey? Check out all the latest foreclosures on this site and make sure that you let us know what you’re looking for. We’re glad to help!