When the foreclosed houses are taken over by the banks they are known as real estate owned. These are often the best deals as they can be thoroughly inspected, are free from all liens and often come with generous discount offers. Adam Wiener of Redfin said “The buyers and their agents need to be on top of everything from the inspection to the financing. Some banks will even charge a per diem fee for late closings.”
In the auctions the banks often quote far below the price to whip up competition and attract hectic bidding so as to be able to sell them fast. The bidders become over excited and in the frenzy pay more. Rick Sharga of RealtyTrac warned, “Remember there are 800,000 REOs in the bank inventories. There’ll be another home to bid on tomorrow.
Full use should be made use of the permission to inspect the house. One should not have a cloudy vision but face the reality of repair costs ahead of the closing. Sharga advised, “Take along someone who can give you a good estimate of how much repair costs will come to.” Professional help will be of vital help.
The agents undergo training in institutions like Redfin. The buyers are warned to keep a cushion amount of 10% to 20% for surprise repairs. Weiner said, “If you end up not using it, go on vacation after six months!”
As in any market it is important to be conversant with the price of similar types of properties. In those areas of high concentration of foreclosed unit the prices fall sharply.
While bidding or responding to bank’s offer this yardstick has to be borne in mind. It is well to remember that any locality flooded with distressed units will see prices tumbling fast. Thus for those buying with a short term view should note that within few years prices may fall further causing losses if one plans to sell it and relocate elsewhere. For those with long term plans it is best to buy a foreclosed house in a stable neighbourhood. The property will in all likelihood retain its value.
It is essential for buyers to be armed with a pre-approved mortgage because one has “to be able to move quickly” noted Sharga.