Real estate investors know how to make money buying
distressed houses. Investors recognize that bargain houses offer the best way
to make a return quickly.
Bargain houses also open up a way for first-time home buyers
to buy with little or no savings for a down payment. If you want to reduce the
amount of down payment needed to buy a house, get the seller to pay your
closing costs. In a hot seller's market when more buyers compete for the same
properties, you either need to increase the purchase price to cover your
closing costs or find a distressed seller.
A bargain house may be in bad shape or the seller may be
distressed. Home sellers who suffer from problems such as job loss or transfer,
divorce, death, pending foreclosure, and lack of funds sell fast for less.
Often these sellers offer incentives to the buyer, like paying the buyer's
closing costs.
A distressed house may also be a "doghouse," a
dump, or a fixer. Owners of fixers are not always distressed sellers, but they
may still feel pressure to get rid of their problem house.
How to Find a
Distressed Seller
Look for listings and advertisements with the words
"make offer," "fixer," "must sell immediately,"
"handyman's special," "divorce," "owner
transferred," and "owner help with closing costs." If you see
two or three of these clues, you know you've found an anxious seller.
Discovering the seller's problem and finding a solution is
the key to buying a bargain property from a seller under pressure. Perhaps the
seller needs to close quickly in this case, a buyer ready with financing in
place with a lender who acts fast can make an offer with a short escrow.
Prepare yourself for quick action by getting your credit and financing in order
before you go home shopping.
How to Buy a
Distressed House
You must understand that a property also needs to qualify
for financing. Extreme fixers in poor condition don't qualify for a 100%
purchase loan. However, houses needing only cosmetic upgrades easily pass a
lender's inspection. If you find a great bargain fixer, make sure that the
house will pass health and safety codes. Sometimes home buyers will help the
seller with little changes that make a house "loanable." Minor changes
like covering exposed wires with switch plate covers, which cost as little as
19 cents, and repairing broken windows can make the all the difference in
passing inspection.
If you need help with your closing costs, find yourself a
distressed seller under pressure to sell. Not only will you get help with funds
needed to buy a home, you might also get a great purchase price and be on your
way to making your future investing in real estate.
Copyright © 2005 Jeanette J. Fisher-All Rights Reserved.
Jeanette Fisher, author of
Doghouse to Dollhouse for Dollars
and other books teaches real estate. She loves to help first-time home buyers
get into a home. For a free 30-page
"Credit
Tips for Mortgage Financing" report, go to
http://recredithelp.com
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