Where To Begin
Checking Credit
Research Before Choosing A Neighborhood
Check the Zoning
New Home Or Resale?
Think You Don't Need Flood Insurance?
Used Homes
Do I Need Title Insurance?
Be Alert For Sellers’ Tricks
Recruiting The Experts
Choosing A Real Estate Agent
The Foreclosure Market
Buying? Think Selling!
ALWAYS—ALWAYS Hire a Home Inspector
Be Your Own Inspector
Partnership Purchases
Condominiums
Financing Tips
Can't Afford A Down Payment?
Negotiating Tips
10 Tips For Winning A Bidding War
Homebuying Checklist
Home Warranty Tips
Can You Afford the Home You Want?
Green Building Tips

BUYERS' CORNER

The Foreclosure Market

With all the news about a collapse in the housing market, many buyers are wondering if there are bargains to be had in foreclosures. Yes, there are, but true bargains are not as easy to find as you may think. While there are an increasing number of homes sold on the court house steps every month, the best deals are rarely found there. And, unless you are experienced in such sales, it's best to look elsewhere.

Many of the best deals can be found among what is known as pre-foreclosure, that is, homes that are in financial trouble and soon to be on the auction block. The downside, though, can be both depressing and, at worst, dangerous. Remember, for a homeowner, foreclosure is a powerful emotional experience, and for some prospective buyers, the idea of taking away someone's home is more than they can stomach. Unfortunately for the owner, however, someone will take their home; and if you are able to structure an acceptable deal with the owner, it can be a "win/win."

Homeowners may be embarrassed or offended when approached about their predicament, and others may interpret your offer as in intrusion into their private lives. A few may even try to sabotage the home before moving out. Hidden damage can cost thousands to repair. On the positive side, if you're able to work a deal with an owner, the potential for gain can be significant. Just be cautious and check everything possible.

Lenders are another source for foreclosures. Begin with their websites; many of them list foreclosed properties there. As banks' inventories grow, they are becoming more willing to drop prices. Banks never want to be in the real estate business. If you are persistent, you may encounter some good buys. While a lender's asking price on a particular home may be at or near market value, most will negotiate. Doing a little research on current prices in the area can provide you with the ammunition to get them to lower their price. If you can show them that the home is priced above the market and can justify an even lower price because of repairs the home may need-many foreclosures need substantial work to be up to neighborhood standards-and, if you remain firm in your offer and stay in touch, you may be rewarded with a bargain price. Be persistent, but not obnoxious.

If you plan to be owner-occupant, your chances of getting a good deal are better. Banks have lists of potential investors that they try to market foreclosures to, but investors never offer anywhere near fair market value. They must consider loan and holding costs as well as marketing and other costs. Their offers rarely compete with potential owner-occupants who can pay a higher price because of the lack of some of the investor's costs.

If the foreclosure market interests you, there are several web sites and publications that list foreclosures, and you can subscribe to foreclosure services that provide monthly updates of every property in a specific area.

 

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