How To Bargain Shop For Real Estate
in Home Buying
18 Sep 2016
How To Bargain Shop For Real Estate
As conscious consumers, we bargain shop for our clothes, our cars, even our groceries. So why not bargain shop for homes? While some homebuyers prefer a more simple approach, others are willing to put their nose to the grindstone and really find the best bang for their buck. Luckily for bargain shoppers, there are many options available.
Whether you’re looking to invest and turn a profit or just looking for a place to live, you should never pay full price if you don’t have to. There are a few good techniques you can apply to find good deals as a buyer in most any market that you’re in. For instance, a lot of people know that buying a home that’s been foreclosed on can save you some cash, but did you know that you can get that home for cheap before the foreclosure sign is put up? We’ll discuss this and more in this quick guide on bargain shopping for real estate.
1. Foreclosure Deals
A foreclosure occurs after a homeowner fails to make payments on their property. When a foreclosure property hits the market, it doesn’t take long before the sharks start to circle. As a first-time homebuyer or as a real estate investor, these are deals you will want to jump on too. The reason is, that little tag hanging from the For Sale sign that reads “foreclosure” is essentially a clearance sticker. But before you jump right in, you have to take the time to learn the process.
When a homeowner falls behind on their mortgage payments, this typically means they have been struggling for quite some time. This could also mean that in some cases, the home may be in general need of repair and maintenance. Be prepared to deal with leaky roofs, missing light bulbs, poor landscaping, cracked windows, broken appliances, etc. So while you may be getting a steep discount when buying foreclosures, it is most important to understand your total cost of repair before making any moves.
One of the biggest tasks you will have when buying a home in pre-foreclosure is getting the homeowner on your side. When an investor is involved in the deal, he or she has to make a profit. If you are an investor, be direct with the homeowner and let him or her know that you will stop the foreclosure process, but you also intend to make a profit. Create a win-win situation.
Once you’ve contacted the owner or the listing agent and are all on board, you will negotiate a purchase agreement and hopefully purchase the home. You will need to negotiate the terms, enter escrow, and close the deal before the property is scheduled for public auction.
2. Auction Properties
There are two different ways a house can reach an auction: either the home has gone into the foreclosure process, or the owner did not pay property taxes. The starting bid on the home can be the remaining balance on the mortgage, or lower.
Once a home reaches the courthouse steps, buyers must be ready to pull the trigger fast. Buying a house at the auction can be a high risk, but the reward can be extremely high as well. You will have to do a lot of research about the current market and have a solid understanding of just how much you’re willing to spend.
Keep in mind that buying a property at an auction, you will likely be required to buy the home with cash. Each auction company and county government requires a certain method of payment. Familiarize yourself with the process at your local auction ahead of time.
One of the biggest tips we can provide you is to make sure you have someone with you at all times who understands your local auction process – especially if you are a novice buyer. This can really help to protect yourself from making a bad decision. Whether the person is your agent or your attorney, have someone there to represent you in the transaction. Having an expert’s help will allow you to reap the benefits and avoid the risks.
3. Bank Owned Homes
A bank-owned property, also known as real estate owned (REO), is a home that fails to sell in a foreclosure auction. These properties can be a great bargain for homebuyers. If you are an inexperienced buyer, bank-owned properties can be some of the safest deals you can get. Since the bank owns the home, they can sometimes end up taking care of things like tax liens or repairs that you may have had to otherwise do. Also, lenders trying to rid themselves of underperforming assets may be willing to offer more attractive terms.
While some REOs are given steep discounts due to damage or location, others may be competitively priced. For this reason, you will want to have an official inspection done on the home, and consult with an expert before you sign any paperwork.
The timeline for an REO purchase can also be a bit longer than a typical purchase. An REO offer is often reviewed by a number of parties, making the process a bit lengthy.
Keep in mind that while these homes are offered at a discount, banks are still trying to make a profit. So don’t be surprised if they counteroffer whatever you throw down.
4. Everyday Ways to Buy for Less
If you aren’t quite ready to jump into foreclosures or the idea of going to an auction is just plain scary, there are other ways that you can chop down the price of a home.
Don’t forget that cash is always king. Cash speeds the buying process because it eliminates a lot of hassles. Also, in some cases, as with certain auctions, cash will be the only purchase option.
Find A Good Location
Buy in a neighborhood that is going through a bit of a transition. It may be up and coming, but still moderately priced. Residents around you may have just started moving in and fixing up places for themselves. If you buy at the right time and in the right location, you could get yourself a bargain deal that will increase in value as your neighborhood improves.
The early bird gets the worm. Be active on your online shopping when bargain hunting for homes. Sites such as Craigslist.com can prove to house a lot of great deals. Be the first one to find it and you can save yourself a pretty penny.
Apply For Grants
Some towns offer transitional and developing neighborhood homes at very steep discounts. You may have to agree to live in the house for a certain number of years or agree to do a good amount of repairs, however this is definitely a program to search for in the area you’re looking to buy.
5. Wrap Up
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