Making an offer on a short sale or foreclosure is not that far off from any other type of home offer. In either case, there are two good ways you can search for homes that match your ‘target’ goals. First, you can search through MLS listings online and use search criteria that match your basic guidelines. Second, you can contract a real estate agent who is experienced with working with banks and REO properties. The advantage to finding an agent with experience in this area is that they should be able to inform you about properties that have not been listed yet. They should also be capable of pushing a deal through quickly, and keeping all of the proper forms in order so that you are holding the property for only a short period of time. Oh, and of course, they should be able to help you sell the home. In either case, once you’ve found a home you like, you’ll want to push the deal through quickly before another investor can snatch the property up!
Making an Offer on a Short Sale or Foreclosure
You’ll be making an offer much the same as you would when buying your own home (you can see our page on that here). As in that case, you’ll want to include a contingency that allows you a few days to have the appropriate home inspection done. You’ll also want to make your offer a reasonable one to begin with. If the home is in foreclosure or owned by the lender, they are likely ready to sell it right away and have priced it fairly. While there is some room for negotiation, most lenders will take the best offer they get without looking into the condition of the home. As soon as you’ve made your offer and the lender has agreed to it, you’ll want the home to be inspected.
You’ll definitely want your home inspector to be an experienced and thorough one who will explain to you what items absolutely must be repaired, and which issues are nothing to worry about. While the contractor is not required to make estimates about the possible costs of each repair that is needful, a good one should be willing to throw out a ballpark figure for you. You should also comb through the home inspection report yourself and see what kind of figures you come up with when researching similar repairs online. There are many helpful forums and resources online where you should be able to get a general idea. Keep in mind that some repairs must be contracted to licensed professionals (such as electrical) and this could cost more than other types of repairs. If the deal still looks good to you, contact the lender to discuss pushing the deal through.
TIP: It’s always beneficial to include contingencies in your offer that will allow you to easily and readily back away from the deal. This is just to cover yourself should you lose some of your financing or change your mind before the official closing.
Depending on the lender and the number of other bidders, you may end up waiting a while to find out if your bid has been accepted or, in a worse case scenario, you will end up not getting the property. In fact, it’s very common for most real estate investors to not get the first couple of properties they want. It takes a while to get into the game and understand the particular market in your area. Rather than being upset that you missed the opportunity, just consider it your chance to look for something better. Once you get the hang of the offer and inspection process, you’ll be in a position to get the properties you can really make the most profit on.
Finally, if you are making an offer on a short sale home and not a foreclosure, there are special considerations that you will want to be aware of. If you are interested in reading more about the process, please see out page on short sales.
Make sense? Move on to Step 4: Home Improvement Repairs