Perhaps you’re familiar with the fascinating world of individuals who earn a living through the art of purchasing and selling foreclosed properties. However, diving headfirst into this realm requires caution and a deep understanding of the distinctive processes and strategies involved, setting it apart from the conventional practice of buying homes listed on the Multiple Listing Service (MLS).
In this exclusive piece, we will equip you with essential knowledge on navigating the intricate landscape of foreclosure purchases in Minnesota. Specifically, we’ll delve into the crucial aspects of establishing fruitful relationships with banks and provide you with invaluable insights into the art of successfully acquiring foreclosed properties.
What Type of Foreclosure Do You Want To Buy?
There are three stages of foreclosure, and each requires a different strategy.
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Initially, you come across a property in the pre-foreclosure stage, often referred to as a “short sale.” At this point, the current owner is still in possession of the house and may opt to sell it themselves to prevent the distress of losing their home to the bank. Homeowners in this predicament are usually motivated to sell, but they aim to recoup the amount they owe on the property to settle their debt with the bank. Time is typically of the essence for these owners, as they face the imminent threat of the bank reclaiming their property. This presents a favorable opportunity for you to find an excellent deal while also aiding a fellow homeowner in avoiding severe damage to their credit.
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Once a home has completed the pre-foreclosure phase, it often proceeds to a public auction, a process that has gained recognition for taking place on the courthouse steps. While advancements in technology have led to some auctions being conducted online, others still retain the traditional in-person format, often occurring on those very courthouse steps. The act of purchasing a home through auction presents a compelling combination of both substantial risks and promising rewards. When a property is auctioned, the bank’s objective is to recover the outstanding debt owed to them, and they are strictly prohibited from making any profit. This circumstance creates a unique opportunity for astute buyers who have the potential to unearth hidden gems among the available properties. By seizing such an opportunity, buyers can secure a remarkable deal, acquiring the desired home by paying the bank merely a fraction of its actual market value. Nevertheless, it is vital to approach these transactions with caution, as auctioned homes are sold in their present condition, often referred to as “as-is.” In this context, the absence of a comprehensive inspection can expose buyers to the possibility of unintentionally acquiring a property plagued by extensive repair requirements or encumbered with various liens and legal obligations. Therefore, prospective buyers must exercise prudence and conduct thorough due diligence before participating in auction proceedings to mitigate potential pitfalls and ensure a successful investment.
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Another type of foreclosure is a Bank Owned REO (Real Estate Owned), which happens to be the most prevalent and often the simplest method of purchasing a foreclosed property. In this scenario, the bank has already taken possession of the property and is eager to remove it from their books promptly. However, it is important to note that these homes are typically priced close to market value. While there are opportunities to discover excellent deals, it is crucial to assess whether the expenses associated with repairing and maintaining the property outweigh the benefits of the deal you are obtaining. This cautious evaluation ensures that the overall investment remains favorable and aligns with your financial goals. By striking a careful balance between the purchase price and the potential costs, you can navigate the Bank Owned REO market effectively and seize advantageous opportunities.
Work With A Pro
If you’re currently in the market for a new home, whether it’s for yourself or your family, it’s crucial to uncover the finest opportunities available. To achieve this, enlisting the services of a licensed realtor is highly recommended. A qualified realtor possesses the expertise to assist you in working with the bank, establishing favorable terms, and navigating the intricate process of purchasing foreclosed properties.
Working with a realtor offers several advantages. They have their finger on the pulse of the market, enabling them to notify you promptly when promising deals arise. Moreover, they possess the knowledge and experience to steer you away from potential pitfalls associated with certain homes.
Nevertheless, it’s essential to recognize that you bear the ultimate responsibility for the home you choose to buy. Therefore, it is advisable, if feasible, to conduct your own independent inspection. By doing so, you can ensure that the property meets your personal standards and is free from any hidden issues.
In the event that you’re interested in purchasing a foreclosure with the intention of a quick resale, it may be worthwhile to consider partnering with an experienced investor who can offer valuable guidance and insights. Alternatively, you can seek assistance from reputable companies like , which specialize in supporting individuals throughout the entire process of purchasing foreclosed properties. Their expertise can prove invaluable in helping you make informed decisions and achieve your goals efficiently.
Get Your Financing In Order
Depending on the home, obtaining traditional financing might require you to jump a few additional hurdles. The banks are investing in you, and if the home appraises for a low amount, you might not be able to get the loan you’re after. Many foreclosure buyers deal in cash.
A cash offer can speed up the process by avoiding additional red tape from another bank. Many foreclosure investors deal only in cash, making the process highly competitive.
Making Your Offer
Know your limits. Sure, you might pay a bit more if you are trying to buy a home you want to live in for the next 50 years. But if you are only looking to flip, you will not want to pay a dime more than you have to.
You must have predetermined price guidelines you stick to. You are better off losing a deal than losing money. The banks will often ask you to submit your “highest & best” offer.
In essence, this is the bank, asking for all interested parties to submit their maximum bid. If you’ve ever bought anything on eBay, you’ll know those last few seconds, trying to get the highest price can be invigorating and stressful!
Don’t get caught up trying to outbid what you think your competitors will offer. Stick to your price, and walk away if you have to.
At Matt Buys Houses MN, our mission is to help you navigate the world of foreclosures and help you find a great deal. If you have any questions about the process, or if you would like to receive early access to deals, fill out this short form, or give our office a call now! 612-293-3532