6 Pitfalls the Foreclosure Buyer Faces and How to Avoid Them
Buying a home can be an enjoyable and rewarding experience, and for most people their home will serve as their single largest investment. If you’re in the market for a home right now then you probably already know that foreclosures are whats hot right now. Foreclosures often look like every other home, but costs tens of thousands of dollars less. Choosing this type of property will undoubtedly save you some money. As with any home purchase there will be some costs. But these costs can be much greater for the buyer who doesn’t take a minute to plan ahead. Most unprepared buyers are likely fall victim to at least some of these buyer traps:
Overpaying for the home they want, or
Losing their dream home to a more prepared buyer or,
(worse yet) buying a home that saves them money, but doesn’t meet their needs.
Fortunately with a little thought and preparation you’ll be able to steer clear of these common pitfalls, cut costs, and secure a home that meets your needs. There are 6 very common and costly home buyer pitfalls and I’m going to show you how to avoid them. The six foreclosure buyer pitfalls are:
1. Bidding Blind. Now that we’ve found our dream home, what should we offer them? The mistake that most buyers make is to low-ball and already amazing deal. If a home is under-priced as foreclosure usually are, you will frequently see multiple offers. When there are multiple offers, somebody is almost always going to offer the list price. If you love this home, and it sees multiple offers and you’ve written a low one, you’re going to lose it. But you also don’t want to over pay either. To avoid losing your dream home and to avoid overpaying, you’ll need to do a little research. Certain websites or an experienced Realtor can provide you with a list of recent area home sales. The key is to know what homes are actually selling for, and not what they’re being offered at.
2. Buying the Wrong Home. What criteria do you have for your new home? This is a simple question that can create a very complex set of answers. More than one home buyer has purchased a home that isn’t the best fit for their needs. People get caught up in the emotion and excitement and sometimes overlook their more basic needs. Take the time to create a list of your needs and wants, and keep it by your side as you search for a home. Use this list as a yardstick; use it to measure every home you look at.
3. Unclear Title. Nobody likes last minute surprises. Especially when those surprises can cost you your dream home. Perform a title search early on in the transaction to be sure your home is free from undisclosed owners, leases, easements, or tax liens. In many areas Sellers will pay for all of some of this expense, but this is usually not the case with foreclosures so plan accordingly.
4. Not Getting Mortgage Preapproval. Getting preapproved is simple, takes just a minute, and costs you nothing. This is one step you wont want to overlook. If you’ve spent any time looking for a home then you already know that Bank Owned Properties, and Government Foreclosure are some of the best deals available. The Sellers of these types of properties will not consider any offer that is delivered to them without a preapproval letter.
5. Contract Misses. The Government and Banks are overwhelmed with sheer volume of foreclosures they have to deal with. And unfortunately one of the things they do to save time is to kick back incomplete or imperfect offers. Miss and initial, or don’t sign in blue ink on a HUD home, and the deal is lost. Choose a Realtor with foreclosure experience, and be sure to check every line of your purchase agreement for missing initials, un-dotted I’s and uncrossed T’s.
6. Undisclosed Fix-ups. These are possible in any type of home purchase, but are more likely to occur with foreclosure properties. The reason is that the Sellers of these types of homes were not the ones who were living in the home. They probably won’t know if any work was done, or if it was done with a permit. Certain types of updating must be done with a permit, and inspected. If this doesn’t happen, the city or county could require you to have this work redone with a permit and then inspected. This can be expensive, and since these homes are sold as-is, it would be at your expense. In these situations you may not be allowed to inhabit the home until all work is done and inspected. To avoid this, have your home inspected, and if work has been done, check with the county to see if a permit was recorded. Not all work requires a permit, so consult with your home inspector first.
To assure a smooth transaction, take a minute upfront and do a little preparation. Create a list of needs and wants then research recent home sales. Talk to a lender and get pre-approved. Triple check your purchase agreement for errors, have a title search conducted, and always do a home inspection. Foreclosures are a little bit more work, but can save you tens of thousands of dollars. A Realtor experienced in the Foreclosure process can help simplify the process and minimize your risks.
Nick Bert is a Real Estate Broker and writer who specializes in helping First Time Buyers and Investors quickly and easily locate the best deals on Snohomish County Foreclosures. You wont want to miss the Edmonds Foreclosures List which features amazing deals on some of the hottest properties in Edmonds, WA.
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