Want to Buy a Foreclosure?

How do you know if a Foreclosure the right property for you? There are things you need to know before you start looking at the lists of available properties. Bank Owned Properties or REO's may be a bargain, but you will need some cash, and patience to be successful in getting your big "deal".

You may be asked to qualify with the lending institution who owns the property, even if you have your own mortgage company. Do not be offended, it is not personal, this is just one of the things that may not make sense, but is required to play the game. The required earest money deposit is also set by the the bank. In some cases it can be 2-3% of the purchase price.

When a bank owns property, they do several things to minimize their costs. They "Winterize". This means draining the plumbing so that there is no need to heat. In some cases the power is turned off. When going to view a foreclosed property you may be asked to sign a release. Ask if there is a reason for this. Sometimes it is a standard form, for liability reasons, in some properties there is a known problem that you will need to look out for. In any case you should always prepare for surprises; bring gloves, a flashlight, dress warmly, and wear sturdy flat shoes. Be prepared to take your time going through the property.

The bank will list the property for sale "As-is". This is exactly what it looks like. You need to know what you are getting into before you agree to purchase the property. If the property needs repairs, you will be the one doing them in most cases. There are some exceptions to this, but those exceptions are rare. I always suggest getting a home inspection done, by a professional. There may problems that you cannot see during a brief walk through. A good inspector will not only allow you to attend his inspection, but encourage you to ask questions. The cost is minimal when you consider the size of your investment into the property.

Closing costs are going to be paid mostly or wholly by you. You need to know that the banks have their own rules about what they will pay for. The normal split of costs between buyers and sellers will probably not apply here. Ask what you will be expected to pay for up front. Have you real estate professional or mortgage professional work up a cost estimate for you before you sign up to buy. What the bank will or will not pay for and the condition of the property can and will affect what type of loan that you can get on the property. Make sure the loan program you want to use will allow you to work with a foreclosure property.

If you have questions, shoot me an email, or give me a call.

FYI: Alaska's Foreclosure rate is much lower than most other parts of the country, but things are starting to slip a little. Nationwide the foreclosure rate was up 4% in August. Realty Trac says the hot spot for foreclosures in Alaska is in the Mat Su., with 1 in every 273 homes now in or facing foreclosure.