![]() ![]() You submit an offer, the seller might counter, and in the end, you could end up paying less than the asking price. When buying a home the traditional way, the seller may be willing to negotiate on the price. This way, at least the bank knows you’re serious about buying the house and paying the mortgage. If you can’t do all cash upfront, it is likely to help to get pre-approved, and it also helps to be willing to put down 20% or more. Plus, most banks favor all-cash offers on foreclosures because they have already lost money on the property and they don’t want to end up in the same situation again. “All the utilities need to be on and testable, there can’t be holes in the drywall or floors, and there can’t be water inside the home.” “To get traditional financing, the home needs to be in really good shape,” Boyce explains. The most common reason: The house is in such bad condition, it can’t pass an inspection. Some lenders simply won’t offer funding for foreclosure properties. ![]() Before you make an offer on a foreclosure, don’t bank on being able to get a mortgage. Challenges in getting fundingĮven if you can get a great price on a foreclosure property, many buyers will still need a loan to help them purchase it. There will be other houses later on, and it’s often better to play it safe when it comes to foreclosures. Before making an offer, set your upper limit, and stick to that number. Steer clear of a bidding war and avoid busting your budget on a home that needs more work than you can afford. “For damaged homes that are priced well below market value, you will probably be competing with developers who plan to rip out everything anyway, and can afford to solve big unknown problems,” Boyce says. There can be a lot of competition from other eager buyers, real estate developers, and flippers. Why? They could end up paying too much for a house that they can’t afford to fix. Paying too much in a bidding warīuyers-especially those purchasing a home for the first time-should be careful to not get stuck in an expensive bidding war. ![]() You might have to factor in the additional costs from overgrown lawns, graffiti, weather damage, and more. The property could have also been sitting there, uncared for, for a while. “The home may have foundation problems, need a roof replacement, and require a heavy workload to bring the home up to code.” “Keep in mind that if the previous owners couldn’t make their mortgage payments, they likely also fell behind on regular maintenance,” de Jong says. In some cases, you can get a home inspection before finalizing the sale, but often, a foreclosed house is sold as is. “The bank will be limited on the disclosures they can provide regarding the condition of the home and previous repairs done,” says de Jong. The worst part is, you might not even have a ballpark estimate of what repairs are needed until you receive the keys. Home repairsįoreclosures are likely to need some work-and the list of needed repairs and renovations can be long indeed. Here are some of the hidden costs you need to look out for when considering a foreclosure home. “It’s better to be pleasantly surprised than to not have the funds to solve the problem,” says Avery Boyce, a real estate agent with Compass Real Estate in Washington, DC. ![]()
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