A foreclosure overhang still shadows home sales in many states. But if hard-hit Florida is any indicator, opportunities are firming up for buyers who know the latest rules of the game. At the most recent ForSaleByOwner.com consumer seminar, held in late June in Ft. Lauderdale, Matt Brown, ForSaleByOwner.com’s business manager, outlined five top tips for buying a foreclosed property.
1. Understand how banks price foreclosures. Yes, banks price foreclosed houses below comparable neighboring houses…but they also price them very low in hopes that buyers will sense a bargain, rush in and bid up the price. These days, many Florida foreclosures are selling for 10% to 15% more than the list price. If you really want the property, expect to compete for it.
2. Banks won’t tell you what you don’t know. Due diligence is your responsibility, said Brown, so add extra time in the sale contract for inspections, reviews by municipal building authorities, and examining the finances of the homeowners’ association to detect any upcoming special.
3. Liens and other claims against the property might be working their way through the court system, unbeknownst to the purchaser of a foreclosure. Cover future losses with ‘gap insurance,’ available through your title insurer, which reimburses you if a legitimate lawsuit, lien or other claim emerges after you have bought the house.
4. Don’t panic. Increasingly, banks are requiring that foreclosures be officially on the market for at least 10 days so that plenty of potential buyers can see them – and line up to make offers. (See #1.) Yes, you have to move promptly. But you don’t have to make your best offer within 24 hours.
5. Buyers who still have some equity can take advantage of the ForSaleByOwner.com guarantee: make a good effort to sell the house through ForSaleByOwner.com, but if a deal doesn’t land on your doorstep, you can get back the ForSaleByOwner.com fee by listing with an agent in our network. That means that selling by owner is all upside: if it works, you keep maximum equity, and if it doesn’t, you get your initial fee back at closing when you use a ForSaleByOwner.com agent.