The home buying process for regular residential real estate is very similar no matter whether you’re purchasing a traditional home, short sale or foreclosure. The foreclosures are just a little more unique. If you know what you’re doing before you start it will make the process a lot easier.
There are several things that you’re going to want to consider starting with representation. Having a good real estate agent is part of it what you’re looking for a whole team of people that will help you get into your new home. This includes a loan officer, a real estate agent, a home inspector, a title company and a closer. All play a critical role in your success.
The first step is to get prequalified for a loan. You want to know all of your options from what you can afford to where your payment will be to what type of loan you’re going to use. You can pay cash for property, you can use a conventional loan that typically requires a minimum of 10% down or you can use FHA financing which only requires 3 ½% down. Either way you want to know ahead of time so when you do find the right house, you have the preapproval in hand when you make your offer.
Choosing the right realtor has a huge impact on the success of the purchase as well. You’re looking for an agent that has a lot of experience with foreclosures as well as short sales. They have to know the difference in order to help you. A good agent will be able to help you sort out all the information keep you on track and get you to a successful closing.
In the state of Minnesota you do not have to be licensed to be a home inspector. This can prove to be problematic if you choose the wrong one. You’re looking for inspector that has a lot of experience in either building homes, is a structural engineer or has been doing it for a very long time.
Title and closing is the last big piece of the puzzle because they are the ones who will make sure that the title is free and clear to be transferred to you. They will prepare all that the documents and make sure that the closing goes smoothly. Again you want to make sure you work for the title company and closer that has done a lot of foreclosures because there’s always extra paperwork.
The biggest difference with a foreclosure versus a traditional sale is in the paperwork. The bank will provide you with upwards of 25 extra pages at times of disclosures that go along with your purchase agreement. In short what they’re saying is they have no knowledge of the property, they’ve never lived there, they want you to hold them harmless and they have absolutely no responsibility. This really scares some buyers when they hear the term as is. All homes for the most part are sold as is in its most common misused term in real estate. With the foreclosures you have to make sure that you do your due diligence through your inspection and all the paperwork to make sure that you know what you’re buying.
Just because it’s a foreclosure it doesn’t mean that it’s a good deal. You have to make sure that you understand the value of the home as it stands currently and what the value of the home will be once you fix it up. If you end up spending considerable amount money upgrading the home to where you wanted to be, you want to make sure that in the end you have any over improve the home for the neighborhood. This is one of the biggest mistakes buyers of foreclosures make. They underestimate the cost and work involved to get the home back to where they wanted to be or they don’t analyze the value of the home to start with.
I’m starting to see traditional sales actually be price better and have more value than a foreclosed home. If foreclosures do not increase again we will continue to see foreclosures lose value. Make sure you understand the market that you’re trying to buy a home in. This can change from city to city within a couple of miles. The one odd trend which is not a bad thing is people looking to buy in Rosemount seem to want to build and not buy existing. This can give you more foreclosure choices at times then in other suburbs like Apple Valley.