When home buyers are looking for a bargain, they often first turn to foreclosures. These can indeed look like a steal, but they often have problems and come with a lot of red tape. If, however, you are armed with some knowledge and are prepared for what you’ll encounter, a foreclosure may be just what you’re looking for. Read on to discover what you need to know about foreclosures in Salt Lake.
Two Main Ways to Buy Foreclosures
There are two main ways to buy foreclosures: in Salt Lake at auction and as REO properties.
Auction
Buying foreclosures at a sheriff’s auction is probably the most common.
“Typically, when a bank first forecloses on a property, it is put up for a ‘public foreclosure auction,’ where the bank attempts to sell the property to the highest bidder. These auctions may sound like a convenient way to buy a home, but it does come with risk.”
“Often, auctions do not give you the opportunity to see or perform any inspections on the property before you buy it. Also, auctions typically require you to be able to buy the property with either cash or certified check.” In addition, you will likely be competing against and trying to outbid professional real estate investors who usually have enough cash in hand to outbid you.
REO Properties
The other common way of buying foreclosures in {market_city] involves what are called real estate owned (REO) properties.
“When a property does not sell at auction, it becomes a real estate owned, or REO, property. The process of buying an REO property is more similar to buying traditional real estate. Here, you can work with a real estate agent, perform inspections for your own benefit, and finance the property through a mortgage.”
This way of being a foreclosure is typically much easier than buying one at auction. You simply make an offer, and the agent representing the bank will present the offer to the bank, and they will accept/reject your offer or make a counteroffer.
To discover more about buying a foreclosure this way, you can consult a Salt Lake agent at (801) 755-3865.
Typically Sold As-Is
Another important thing you should know about buying foreclosures in Salt Lake is that they are typically sold as-is.
Foreclosures usually happen because the owners stop making mortgage payments. “Therefore, when the bank puts an REO property on the market, they’re already operating at a loss. Their goal is to recoup as much of that loss as possible. As such, foreclosures are typically sold in as-is condition, meaning that the bank is not willing to cover the cost of any necessary repairs.” In addition, the foreclosure process can take months to years, so such properties are usually distressed and in need of substantial repairs.
That means, then, that you need to be prepared to pay the repair costs. “Depending on the state of the property, you’ll either need to have extra cash on-hand after your down payment and closing costs, or you’ll need to investigate getting a renovation loan, which will allow you to roll the costs of any repairs into your mortgage.”
Risks/Problems Associate With Buying Foreclosures
Even though you can often get them at well below market price, there are not a few risks and problems associated with buying foreclosures in Salt Lake, such as . . .
Problems with the Property
As we mentioned foreclosure homes are sold as-is, and you’ll have the expense of repairs. And on top of that, people facing foreclosure are often angry and frustrated and will try to get back at the bank by removing appliances and vandalizing the property.
Hidden Costs
“Auction properties often have delinquencies such as back taxes and liens attached to them. The liens may be imposed by the Internal Revenue Service (IRS), the state, or other creditors. This can add further costs to an otherwise desirable house. Whatever is owed, the government must be paid before the buying process can proceed.”
Long Process
Buying foreclosures involves a lot of paperwork and a lengthy process. “[T]he owner’s lender has to approve the deal, and that can delay closing. Serious damage found in the house can result in a lower home appraisal, which may affect the buyer’s ability to secure a loan. Some lenders won’t lend below a certain dollar amount, because the profit potential on a lesser loan isn’t worth the risk. . . . While you’d think a bank would be eager to unload a repossessed residence, response times between the bank and other involved parties can be sluggish with REO properties.”
Stiff Competition
As we mentioned, you will also be facing stiff competition when bidding on foreclosed properties, especially in an auction setting. “Increased interest and competition – not just from potential occupants but from investors and professional house flippers – are inevitable when dealing with worthwhile foreclosed properties. When a foreclosed home is priced attractively, numerous offers can come in rapidly and a bidding war ensues. A house that was a bargain can rapidly become a costly property.”
Where to Find Assistance With Foreclosures
Buying a foreclosure, then, can be a great way to get a bargain on a house. But you will usually be facing some risks and not a few problems, chiefly because it will typically be an as-is sale. Still, you can lower the risk and increase your chances of getting a great deal by working closely with a Salt Lake who has experience with these properties. So if you’re interested in buying foreclosures in Salt Lake, contact us at (801) 755-3865.