Buyers are drawn to distressed properties. After all, "the No. 1 reason to buy a foreclosure is the potential for a good bargain," says Daren Blomquist of RealtyTrac.com. Indeed, discounts often can range from to 20 or 40 percent off on a short sale or foreclosure compared to a sales price of a nondistressed home. But despite the big bargains, buyers need to tread carefully before jumping in. Blomquist provides some of the following tips in buying a foreclosure in a recent article at Business Insider.
- Beginners may want to focus on REOs. New buyers may want to avoid short sales, which often come with lengthy negotiations or foreclosure auctions that often require all-cash payments. On the other hand, REOs, Blomquist says, can be similar to a traditional home sale in some ways and can offer some of the biggest bargains. "A bank isn't emotionally attached to a REO; it's just looking to recoup as much of its losses as possible," Blomquist told Business Insider. "So the lender is often more willing to capitulate on price."
- Don’t forget the inspection. Many distressed properties are sold “as is” and can come with a host of problems if buyers aren’t careful. Blomquist recommends getting a home inspector to inspect the home prior to any purchase. Buyers will then have a list of any potential problems with the home, along with estimates for costs of repair. Buyers can then use the list to possibly negotiate a lower price, Blomquist says.
- Don’t expect appreciation right away. "It's important to not make the mistake of counting on any major price appreciation in the near term," Blomquist advises buyers. "We're still in a depressed market, and we're probably not going to see home prices appreciate much for quite some time."