Many people believe that in order to invest in pre-foreclosure properties you must have a substantial down payment in order to obtain a loan from a investor, bank or other lender. The bank doesn’t want to foreclose – that looks bad on their books and they have to pay out $50,000 – and the owner doesn’t want a foreclosure on their record. You need to be represented by a licensed real estate agent to bid on one of these properties. A neighborhood of foreclosed homes bodes ill even if they have been purchased and are in relatively good shape.
Since banks do not repair or maintain properties, no such improvements will have been made on your potential house. If you prefer a safe negotiation and good deals for your purchase, the best preference is through the bank foreclosed homes. There are many factors to consider when buying a foreclosed home compared to a traditional home purchase.
The price attracts the buyer to purchase the property which is not possible with any other property in the real estate market. The mortgagor may be required to pay for Private Mortgage Insurance , or PMI, for as long as the principal of his or her primary mortgage is above 80% of the value of his or her property.
Ideally, you negotiate the sale to the buyer for a price significantly above what you are paying the home owner and for a shorter settlement period. Most mortgages will be limited by the appraised value, and the condition of these homes often leads to very low appraisals, even in markets where home prices are rising fast.
The process also took longer than a normal sale because the bank was slow to respond. This becomes a difficult task as property owners were often required to vacate the premises before the property was either sold or taken back by the mortgagee through completion of the foreclosure process leaving the ownership records unchanged.