Once you have found an agent specializing in foreclosures, it is time to understand your financing if you are not paying cash. Foreclosure properties will sometimes go fast because they are most likely priced to sell. After all, the bank wants to get them off their book quickly to remove that debt. If you are getting a loan, you want to be pre-approved and ensure your financing will work on your chosen property.
The buying process is very different and can take longer to close. You may not be able to get a loan on some of these properties, and many people do not understand that because they think, if there is a loan on it now, why can't I get a loan on it? The answer to that question is because of the property's condition. When the property was purchased, it was most likely in much better shape than when it was foreclosed on. With that being said, it may not qualify for a traditional loan.
Agents will know what guidelines must be met for each type of loan you may want on a property. In our area, we see a lot of VA foreclosures because of the proximity to Ft. Riley. Many buyers think they can get a VA loan because it is a VA-foreclosed property. That is often not true since the VA has stringent guidelines on the condition of a property before a veteran can purchase it. For example, the VA foreclosed home may have had a VA loan on it when it was purchased, but because of the current condition as a foreclosure, it will not pass for a new VA loan. This is not true in all homes, as some have been kept up, but most need repair.
Once you have found a property and are ready to make an offer, you must ensure your agent knows the correct process for the company that owns the property. Once you make an offer and it is accepted, you will have to put down your earnest money deposit. The foreclosure company will most likely set the intense money amount as many of them have a minimum they will accept. If you make a cash offer, most will require 10% of the purchase price as earnest money. You must ensure you understand what you are buying before this point because once you sign the contract, you are in this until the end.
A foreclosed property must typically be bought with cash or a conventional loan with a sizeable down payment. Then, the buyer will be responsible for all repairs found during inspections. For more information on the inspection process, click here.
