Purchasing a home in foreclosure is flaunted as a way for both investors and new homeowners to get an amazing deal on a property. A foreclosure happens when the previous homeowner cannot meet their monthly mortgage payments resulting in the lender (the bank) repossessing and selling the home. Prices are often very low attracting many interested buyers. But buying a foreclosure can be unpredictable and a bit risky, and requires a lot of patience and room for budget flexibility. With proper diligence and the help of one of Calgary’s best Realtors®, you can feel confident in purchasing a foreclosure property for an outstanding price.
4 Tips For Making An Offer On A Foreclosed Property
Buying a new home is difficult enough, but buying a foreclosure comes with its own set of challenges. They can be extremely enticing and are often sold for a lot less than typical homes on the market. While you can save a lot of money, you will also need to be prepared for the red tape and limitations associated with buying a foreclosure. Before purchasing a foreclosure make sure to:
Know The Property History
Take a look at the value of the loans that were once secured on the foreclosure property. The bank will most likely accept an offer that is somewhere between the mortgage balance and the foreclosure sale price. Also, ask your Realtor® to find out the bank's purchase price on the property and compare that price to the bank's asking price so you can better strategically place an offer.
Determine Comparable Sales
In most cases, the listing price on a foreclosed property has little bearing on the value of the home. The market value will be the biggest determining factor. More often than not, you will be up against more than one competing offer above the asking price. Here are a few ways you can see what you are up against:
- Look at the last 3 months of comparable sales
- Check out current pending sales in the same neighbourhood as the foreclosure property
- Look at active listings in the area
By looking into these three things, you will be able to better formulate an attractive offer without worrying if you are offering too high or too low of a price.
Ask About The Number Of Offers Received On The Property
If there are no offers on the property, you will be in a safer position to offer below the asking price. However, if there are other buyers interested, you will likely have to make an offer above the asking price. If there are more than 15 offers on the table, bear in mind that many of these offers are probably made by investors offering all-cash deals with little to no contingencies. These offers are extremely attractive to the banks, therefore, you will have to increase your offer in order to compete with these offers for the property.
Shorten The Inspection Period
If other buyers ask for a longer inspection period, offer the bank a lower inspection period with your offer. This will show the banks that you are a more serious buyer and that the sale would move along a lot more quickly and efficiently with you. The bank wants to recuperate as much money as they can and as quickly as they can to make up for the lost money with the previous owners. Offering a shorter inspection period will move the sale along much faster, which is exactly what the banks want. Make sure you are still diligent with your inspections and that they are not too rushed so you do not miss finding any serious issues with the property.
Calgary Foreclosure Experts
Foreclosed properties can create unique opportunities for the right buyer to receive the home of their dreams for a steal of a deal. As long as you are aware of the associated risks and are prepared to enter the foreclosure market, buying a foreclosed home can be a unique, thrifty investment opportunity.
An experienced Realtor® will help guide you through the foreclosure process and ensure you make strategic offers as well as alert you of any dangers or red flags that normally come with buying these types of properties.
The Mel Star Team has over 40 years of experience in Canada’s real estate industry. We know the stress and uncertainty that can come when buying a foreclosed home. We mitigate the risks by offering an all-inclusive, one-stop concierge service for all your home buying needs.
To find out more, contact us at (403) 284-633 or fill in our contact form.
FAQs
Can I get a mortgage on a foreclosed home?
Yes, you can. You will be able to finance the purchase with a mortgage. However, banks do find all-cash offers more attractive.
What is a foreclosure?
A foreclosure is the process of a lender (the bank) repossessing a home from a homeowner when they fail to make their mortgage payments.
Do I pay for the inspection on the foreclosed property?
Unfortunately, the bank will not pay for any inspections on the property. This is an expense you must take as a potential buyer to ensure that the property you are interested in does not have any red flags or require extensive work and renovations.
CONTACT US
We are here to help and we'd love to hear from you. Call us at 1-403-861-9944 and we will be in touch shortly!