Tuesday, July 22, 2008
How to Buy a Foreclosed Home
How to Buy a Foreclosed Home, Wall Street Journal July 21, 2008 3:21 p.m.
For anyone wanting to take advantage of today's buyer's market, distressed properties offer the best chance to make a killing. But you need good credit or ready access to cash, and a taste for the hunt.
As I've mentioned in previous columns, searching for a foreclosure can be maddeningly frustrating. Newspaper notices of foreclosure sales are disorganized; foreclosure-listing Web sites charge hefty monthly fees; lenders post only minimal information on the properties they've taken back. And many real estate agents have little experience with these sorts of transactions, and don't want to be bothered with them.
That means foreclosure buyers must be willing to do more sleuthing on their own to find the best deals. Here are some tips to get started:
• Focus on one neighborhood: Although distressed properties are found everywhere these days, not every one is a good deal, especially if the seller bought at the top of the market or if the entire neighborhood is undergoing a decline. It's best to concentrate on places where there are relatively few distressed properties and good job growth. These areas will revive quickly once housing returns to normal. Once you've targeted and studied property values in a particular neighborhood, drive around and look for properties that aren't as well-kept as the ones around it -- then start ringing doorbells. You may be able to buy directly from an owner who's in financial trouble even before the loan defaults. • Research the property: Although major real-estate Web sites and portals for both agent-listed and for-sale-by-owner properties list foreclosures these days, most provide minimal information and refer you to a subscription-based foreclosure listing site. Some lenders also list the properties they've taken back, though information on these properties is also sparse. (Here's a good link to these lender sites) • Once you've targeted a property, check out the local assessor's office: Web sites for these offices often list the owner of the property, tax information, assessed value, square footage and aerial pictures. Most importantly, they reveal what the seller paid for the home, which could be more or less than the property is worth now. The best deals generally come from sellers who have owned their homes for a long time and have built up some equity.
Associated Press
• Learn what the seller wants: Knowing what motivates the seller gets you the best deal. If monthly carrying costs are high, you'll score if you can settle quickly. Or if a lender is trying to minimize losses on a foreclosed property which no longer is worth the unpaid loan amount, you might be able to negotiate a very good deal on financing by agreeing to pay a close-to-market price. • Find an experienced broker: While it makes sense to gather as much information yourself as you can, and to deal directly with sellers whenever you can, some lenders refuse to deal directly with buyers. If that's the case with the property you've targeted, find an agent with ample recent experience with distressed and foreclosed properties. Ask the agent to explain the details of the deals: How much was offered compared to the asking price, how long it took for the seller or lender to accept the offer, and any concessions the agent was able to negotiate. Pay attention not just to the answers, but to the emotions the agent expresses. Foreclosure deals are often complex and time-consuming; you don't want an agent who lacks diplomacy, patience and perseverance.
For anyone wanting to take advantage of today's buyer's market, distressed properties offer the best chance to make a killing. But you need good credit or ready access to cash, and a taste for the hunt.
As I've mentioned in previous columns, searching for a foreclosure can be maddeningly frustrating. Newspaper notices of foreclosure sales are disorganized; foreclosure-listing Web sites charge hefty monthly fees; lenders post only minimal information on the properties they've taken back. And many real estate agents have little experience with these sorts of transactions, and don't want to be bothered with them.
That means foreclosure buyers must be willing to do more sleuthing on their own to find the best deals. Here are some tips to get started:
• Focus on one neighborhood: Although distressed properties are found everywhere these days, not every one is a good deal, especially if the seller bought at the top of the market or if the entire neighborhood is undergoing a decline. It's best to concentrate on places where there are relatively few distressed properties and good job growth. These areas will revive quickly once housing returns to normal. Once you've targeted and studied property values in a particular neighborhood, drive around and look for properties that aren't as well-kept as the ones around it -- then start ringing doorbells. You may be able to buy directly from an owner who's in financial trouble even before the loan defaults. • Research the property: Although major real-estate Web sites and portals for both agent-listed and for-sale-by-owner properties list foreclosures these days, most provide minimal information and refer you to a subscription-based foreclosure listing site. Some lenders also list the properties they've taken back, though information on these properties is also sparse. (Here's a good link to these lender sites) • Once you've targeted a property, check out the local assessor's office: Web sites for these offices often list the owner of the property, tax information, assessed value, square footage and aerial pictures. Most importantly, they reveal what the seller paid for the home, which could be more or less than the property is worth now. The best deals generally come from sellers who have owned their homes for a long time and have built up some equity.
Associated Press
• Learn what the seller wants: Knowing what motivates the seller gets you the best deal. If monthly carrying costs are high, you'll score if you can settle quickly. Or if a lender is trying to minimize losses on a foreclosed property which no longer is worth the unpaid loan amount, you might be able to negotiate a very good deal on financing by agreeing to pay a close-to-market price. • Find an experienced broker: While it makes sense to gather as much information yourself as you can, and to deal directly with sellers whenever you can, some lenders refuse to deal directly with buyers. If that's the case with the property you've targeted, find an agent with ample recent experience with distressed and foreclosed properties. Ask the agent to explain the details of the deals: How much was offered compared to the asking price, how long it took for the seller or lender to accept the offer, and any concessions the agent was able to negotiate. Pay attention not just to the answers, but to the emotions the agent expresses. Foreclosure deals are often complex and time-consuming; you don't want an agent who lacks diplomacy, patience and perseverance.
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