If you are someone who wants to purchase real estate at a great discount for investment or personal use and don't know how the system works keep reading. Even if you think you know how to buy pre-foreclosure and foreclosed homes (REOs) keep reading!
Chances are, even if you have been in the market for a while, you have seen or heard of how differently each property is being handled. Let's cover a couple of prime differences between the two situations:
Pre-foreclosures
Pricing If the property is over-leveraged, or even if it isn't, the price will likely be somewhere below the market value' to attract buyers, but may just be a shiny wrapper on an empty package
Due to the fact that most people are not paying full price for real estate these days, even homeowners who aren't behind on their payments or owe more than their house is worth, are just trying to get out' and will attempt a "short-sale" just to sell the house. This may or may not work. Proceed with caution.
In the case that the property is grossly over financed, the listing price may be an acceptable short-sale payoff amount to the mortgagor, or it may not. Be cautious when putting in an offer on a property because the asking price has most likely not been approved by the lender, who has complete control over the sale.
In some cases the listing agent may not know how to discount the home to a value close to what will be accepted by the lender; and the price will be higher than what you should pay for the property. If you know what you're doing, this can be a great way to find a bargain while avoiding a lot of the competition from other bargain hunters'.
Timing - Many times you can be held up for months before getting an answer from the lender on a short-sale/pre-foreclosure situation; potentially missing out on other opportunities that may come along. To prevent this from happening to you, ask a couple of relevant questions before submitting an offer.
Have you begun working with the bank on the short-sale? (every person will handle this differently, so get as much info as you can)
Do you have any idea of when the lender will be giving approval on the short-sale amount?
How did you arrive at the listing price? (reverting back to the last point, this is a very important question to ask whenever working on a pre-foreclosure property)
REOs (Real Estate Owned) or Foreclosure Property
Pricing The list price is a number the lender will accept; however, in rare situations the listing agent may actually convince the lender to under-price the property and the actual sales price may be higher because of a bidding war Yes! A bidding war in this market! (this can also happen with a short-sale property, although much less common)
Timing Even though you are still dealing with the bank, at this point they have come to the realization that they're not getting their money back and need to get the property off the books' as soon as possible. Expect a new found sense of urgency when dealing with REOs/foreclosure properties. Cash, and a quick closing, are King of this domain.
To see a current inventory of foreclosure and other bargain properties hurry over to: www.AcmeInvestmentProperties.com . For more foreclosure and pre-foreclosure investing advice and assistance contact Shawn Hutchison by email: hutch@acmeinvestmentproperties.com . Shawn is a licensed real estate professional in the state of Florida and a nationwide investor.
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