BUYERS–FORECLOSURE QUESTIONS

In the current marketplace, buyers are very curious

about foreclosures and bank owned properties.  How do you maneuver through the quagmire?  What are the potential pitfalls?  Here are a few questions you as a buyer should be asking a real estate professional which will help you decide if foreclosure is the route to take.  (Information gleaned from Realtor Magazine - April, 2009)

• Is now a good time to buy?  This varies from market to market — different parts of the country as well as different parts of each State.  For instance in Phoenix, there are many areas with higher rates of foreclosure than others.  While no one community in metropolitan Phoenix has been immune to this, there are more foreclosures in certain valley cities.  
• What do I do first?   As a realtor, I request that my buyers see a lender and get pre-approval.  Have at hand a Loan Status Report completed that can be presented with any offer.  It will show the bank that you are  serious and qualified which will up the chances of having the offer accepted.
• What is the difference between a bad foreclosure and a good one?  Be sure that you know about any liens on the property, which would include mortgage debt, lines of credit, construction loans, and/or 2nd or 3rd mortgages — these could be transferred to you, the buyer if you don’t do your due diligence.  However, if the property has gone through auction and become bank owned (REO), that debt has most likely been addressed.
• If you’re a qualified borrower, can you negotiate better loan terms?  Arizona is one of the harder hit areas, so lenders are trying to get these properties off their books.  If you have a good credit score, the bank may be willing to cut you a deal.  It doesn’t hurt to ask.
• What costs are associated with buying a foreclosed property?  If you are considering buying a property as an investment and want to rent it out, consider that there are costs associated with the upkeep and marketing of the property whether as a rental or sale.  These costs include paying a sales commissions, marketing costs for rent or sale, taxes, insurance and maintenance and upkeep.   
• Will the choice of neighborhood will affect the foreclosure investment?  Of course it will.  If there are many, many signs up and down the streets of a certain neighborhood, this should be a red flag.  A lot of foreclosures in a single neighborhood would indicate there may be further decline in value in order to sell them all.  

Bottom line, be sure that your do your homework.  While there are great deals out there, they are not without their issues.  The days of fix and flip are over for awhile.  If you’re going to buy a foreclosed property and live in it, great or if you’re going to rent it, great.  Remember you must be patient.  

I’ve heard many different stories from various realtors about buying and selling foreclosures.  I would prefer a foreclosure to a short sale.  At least the process is far enough along which will allow you to get an answer from the bank in a reasonable amount of time.