If you ask your buyer's agent to search the MLS for "REOs," you will probably find that a small group of real estate agents specialize in listing REOs for sale in your neighborhood. Unless you have direct experience negotiating with banks, you may receive better representation by hiring your own buyer's agent.
How do I get a good deal on a foreclosed home?
Before you select an agent, choose several and interview the real estate agents to find a good fit. Once you've located some listings of interest and found yourself a buyer's agent, you're ready to move to the next step, which is contacting the bank.
If the home listing is relatively new to the market, it is very possible that the bank will not deviate much from its asking price. You will have greater negotiating power if you make offers on homes that have been on the market for longer than 30 days. Here are more tips on the buying process:. Beware that you may run into unexpected fees during the transaction. Take note that the bank may also run the transaction differently than you would experience in a non-foreclosure home purchase.
The bank often does not want to sit on its inventory. Since it did not receive its minimum bid from an investor or home buyer during the foreclosure sale at the courthouse, there's a decent chance that the bank might price that REO home for a significant discount, just to get rid of it.
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This may depend on its internal accounting and how many homes it already has on its books. There are a few things you'll want to know about REO listing agents:. REO listing agents often give discounts to the banks in return for their business, because these agents deal in volume and sometimes the bank's asset manager gets some of the commission. Under dual agency , the REO listing agent will earn both the listing commission and the buyer's agent's commission.
Buying a Pre-Foreclosure Home
To attract buyer's agents, many banks offer a larger percentage of the commission to the buyer's agent while discounting the listing agent's commission. REO listing agents generally represent the seller, not the buyer.
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Consider whether you want your own representation to serve as your advocate. REO listing agents are typically top-producing agents because of the volume of business they conduct.
They typically do not spend a lot of time working with buyers and will probably not engage in much hand-holding. Some REO listing agents are so busy that they hire assistants to field calls. Many do not give out their private cell phone number, which can make communication difficult. Buyer's agents have a fiduciary responsibility to protect your interests. Buyer's agents do not represent the seller, even when the seller is paying their commission. In most cases, nobody has lived in the house while the bank has owned it.
You can expect that these houses will need repairs. That usually means the house has been sitting closed for months with no air conditioning—perfect for mold, mildew and unpleasant odors.
Real Estate Investor's Guide To Pre Foreclosures | FortuneBuilders
The previous owners could have made things even worse if they were desperate because of the foreclosure and left clutter or trash as they were leaving. Unoccupied houses can also be targets for vandalism and theft, which can mean missing appliances, removed copper piping, graffiti or delinquent teens breaking in to do heaven knows what. You name it. It could be a literal crack house. The yard will probably be overgrown and in desperate need of cleanup and landscaping.
So, what does this mean? You need a home inspection and a good bid on repairs so you can apply the formula for getting a deal on the house:.
You and your real estate agent agree this is a fair market value for the house in pristine condition. Another option is to buy a home from the owners before the foreclosure. The owners have the right to sell the house at any point before the auction. Contact the homeowners and make an offer. The transaction will have to happen quickly, though. And remember to buy title insurance to protect yourself from liens or other hiccups down the road. Is it a good idea to look at a foreclosed home as a first-time homebuyer?
Talk to our friends at Churchill Mortgage about getting preapproved before you start your home search. Pump the breaks!
8 Proven Ways to Make Money in Real Estate
The period of time varies and can be up to one year. Check out the laws in your state to see if this applies to you. Just make sure when you conduct interviews that you ask if they have experience buying foreclosed houses. Find an ELP today! Back Home.