Study the Property First
Stockton California Real Estate Brokers had this to advice for those hoping to buy a foreclosure home.
Be realistic about pricing. Many buyers aren't, said Sylvia Wong of Sylvia Wong Realty in Stockton, who represents several banks selling foreclosure properties in the area. "They want to get a steal," she said, yet low prices are drawing lots of potential buyers into the action.
Don't get carried away with the desire to get what you think is a great deal without considering the condition of the property or the location. "The rule of thumb is price dictated by location and the desirability of the property, "Wong said.
Study the property first, because many foreclosure houses have flaws, Wong said. "Banks are honorable, but they've never seen the property."
Don't assume you have to throw a high offer at foreclosure to have a chance. "In a lousy area. you don't have to bid up," Wong said. But in a prime area, offers will have to be competitive, she said, citing a recent Brookside property listed at $334,000 and selling for $395,000." That is typical in a very good area.
On prime properties, offers at 20% over asking aren't uncommon, said Jerry Abbot, president and co-owner of Grupe Realtors, Stockton. Lela Nelson of Lela Nelson Realty in Stockton added: "If you can afford a $200,000, you had better be looking at a $150,000 house. They're artificially priced low."
Not only are foreclosures sold "as is", the usual termite and roof inspections aren't done by the seller. Still, a buyer does get time to have inspections done after a deal is signed and then has wiggle room to get out of the deal if costly problems turn up. Abbott cited one buyer who found out via a roof inspection that the house needed a new roof at a cost of $21,000, but the bank agreed to cover that cost to preserve the sale.
Forget putting contingencies in a offer. "No contingencies are being accepted, period," Nelson said.
Get pre-qualified for a mortgage loan before making any offer. Wong said that surprisingly, many would-be-buyers neglect to do so.
Ben Balsbaugh, residential sales manager for PMZ Real Estate in Stockton, said many foreclosures are held by Countrywide and Wells Fargo and they require that any would-be-buyer get pre-qualified for a loan by them, even though the buyer can get the actual loan from another lender. It is extremely Important to have all your ducks in order before attempting to write an offer," he said.
Be prepared to get busy and stay busy. "You need to be working with a very active and aggressive agent, and you need to be prepared to write several offers," Balsbaugh said. it is not uncommon to write three offers before one gets accepted."
Because the banks want to move the foreclosed properties, they are looking for the most solid potential buyer. A higher credit rating looks better. A bigger down payment looks better. And so on.
Nelson said that generally full-price cash usually beats a conventional, federally guaranteed loan, which beats government loans such as FHA or VA that may require repairs be made.
But Wong said banks are making deals on lower-end properties involving many types of loans, including the Nehemiah home loan program, which offers down payment assistance on an approved FHA loan of up to 6% of the selling price for a down payment, closing cost or both. Said Balsbaugh: "If you are only approved FHA, don't give up. You can still find a home. It just may take more time.
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