If my recent column about the three types of foreclosures peaked your interest in making such a purchase, read on to learn a few of the common mistakes to avoid when you’re ready to make an offer.
First, don’t get caught up in a bidding frenzy. Banks may under-price their offering, hoping to generate multiple bids and sell quickly. Don’t get overexcited – there’s another foreclosure to bid on tomorrow!
Second, don’t underestimate your repair costs. Carefully read the inspection report, and factor in an additional 10-20 percent of the purchase price for unexpected repairs.
Third, don’t ignore the “comparables” for similar properties in the area. If there are abundant foreclosures in the neighborhood, be sure that you have the latest home prices to compare against, and keep your offer at or below those figures.
Fourth, if you’re buying for the short-term because you may relocate or upgrade in a few years, don’t go house hunting in a neighborhood full of foreclosures. These properties may continue to decline in value, meaning you may have to sell at a loss in the near future. Protect your investment by purchasing the only foreclosed home in a better neighborhood.
Finally, do secure loan pre-approval, because you’ll need to move quickly once you’ve found your ideal property. With your agent as your field guide, your hunt should be successful!