The Art of Buying Short-Sale/Foreclosed Property

The continuing rise in foreclosed and bank-owned property (short sale) presents value opportunities to the real estate buyer.  However be forewarned, this takes a complex process of buying real estate and add legal perils, more emotions and the rules of the game are in flux.  Complications & risks take on a new dimension. 

Wear Many Hats

Many that “test the waters” start to realize not only the time consumed, but all the required inherent knowledge.  Most start their research in appraising market value.  But you also need to search title, loans & liens.  Then as many of these properties are almost always in a distressed state, you then need to determined costs of "rehab" property back to livability and/or marketability.  “Wearing all these "hats" may be beyond your ability and/or lack of time.

Seek Professionals

Wearing many hats is simply not practical.  To successfully traverse your way through this maze, you need a team of experienced professionals.   Appraisers, specialized real estate agents, title and escrow & home inspectors to name a few.  Look for experience in this sector and determine if they are a “team player”.  It’s best to align your team prior to doing your research.  It’ll smooth out the process once you identify some prospective property.

Negotiations

In light of a distressed sale, the traditional sequence in a real estate cycle becomes compromised.  In a practical sense, whether its foreclosure or preparing an offer to a bank, all of the negotiations takes prior to escrow.  Even tough you always can submit a “request for repairs” during escrow, most understand that no further adjustments will be made.  Buyers are blind to the conditions of the property prior to an inspection.  Also banks have not evaluated the conditions of the property.  If an inspection reveals significant findings that have significant costs to remediate the problem, they need to revaluate to absorb these costs or exercise your option to cancel the transaction.

 One successful strategy is to have a home inspection and appraisal completed prior to making an offer.  Several advantages are realized.  You become more informed of market value and conditions of the property.

Secondly, when approaching a bank, your offer that includes an appraisal and inspection, looks more professional and shows diligence. More importantly it helps the bank understand (justify) your offer.  Your offer stands out in looking more formal, informing & professional.  As other investors are looking for value in distressed properties, you have competition.  This strategy makes your offer stand out.  For a more complete article, please