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Tips & Strategies to Buying Foreclosures
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If done right, a foreclosed home can be a great real estate investment that can provide you with an excellent rate of return. But, for you to navigate all the do’s and don’ts of the foreclosure market, it’s important to fully understand all the aspects and procedures of buying one of these distressed homes. Is it a good investment? Can I get a mortgage on a foreclosed home? What are the risks? These are all very important questions, particularly the one about the risks; this one and many others I will answer below. I will help you to better understand the exciting and often rewarding world of bank owned properties and will give you a step by step approach to this process, so you can take your new-found knowledge and get started investing in the perfectly planned, high rate achieving venture.
1) Find a real estate broker and a lender.
I am a dual licensed Mortgage Specialist and Real Estate Agent that is fluent in the foreclosure process. I shop around on your behalf at all banks and credit unions to see what their lowest mortgage rates are and explore a variety of options such as 3, 5 and even 10-year terms and how each of these terms will best serve your needs. Once I have you preapproved for financing, I can then walk you through the process of buying a foreclosure.
2) Look at comps before making an offer.
There’s no rule of thumb on what the bank’s bottom line is on price. Just as with any other real estate purchase, you must look at the recent sales prices of comparable properties, or comps. You really must look at the comps in today’s current market conditions and write a competitive offer based on that information. Sometimes the bank prices the homes low, and the home will have multiple offers over list price within hours. Other times it’s priced too high, and you can come in lower.
3) Find tradespeople who can assess and repair damage.
Repairs are almost inevitable with foreclosed houses, I recommend getting to know tradespeople who can assess and repair damage from pests, mold and leaks. Through my exclusive network, I am pleased to recommend tradespeople whom I trust.
4) Buying a foreclosed home at an auction – How does it work?
Once you have found that perfect foreclosure home – follow these next steps to financial freedom:
- Write an offer – Once we have done the market research and have arrived at a price. I suggest that the offer not be too low as it may be rejected by the bank, then it is a waste of time for all parties.
Having a professional and experienced realtor is extremely important during this stage. Remember that every foreclosure sale is an “as is” sale, meaning that what you see on completion date is what you are going to get. All this information will be presented to you in a Schedule A form, I will go over it with you to ensure you understand it. The offer will be subject to court approval – as the court as well as the bank must accept your offer. Once the Bank has Accepted your offer:
- A court date will be set.
- our offer price is released to the public – Therefore it is important not to make your offer too low as making your initial offering price public invites competition.
- Arrival of court date – all offers will be presented to the judge and the highest offer is usually the one that is accepted.
- Once the highest offer has been accepted, a court order is drafted, and the successful candidate will take possession of their foreclosure sale at an agreed upon date.
5) What is the risk of buying a foreclosed home?
Just like any type of real estate investment, buying a foreclosed home does come with a certain amount of risk. Being educated about the most common mistakes that buyers make when purchasing a distressed home will help you navigate the sometimes-tricky world of foreclosure sales. Follow these insider tips and gain knowledge-they will give you an advantage and make your next foreclosure home a great revenue generating real estate investment! These important tips include:
- Don’t offer too low of a starting price. If you offer too low a price you will be rejected before ever getting to the auction stage of the foreclosure process. To avoid this common mistake, work hard with your realtor to offer a realistic initial amount.
- Never assume that your offer will be the only offer. You may need to adjust your original price if you want to pursue that bank owned property.
- Be prepared to lose in court. You may be outbid and end up losing your foreclosure sale. Remember, this is all just part of the game and you cannot take this personally.
- Be prepared for some of the major risks. These include not receiving the home in the same condition as when you first viewed it. This is a distinct possibility that you must be prepared for. Another risk is that tenants still occupy the property when you take possession and may have to be forcibly removed.
6) What should I look for when a buying a foreclosed home?
Buying a foreclosed home is a sound real estate investment and a great way for you to generate revenue. Although a distressed house comes at a discount, there are some factors that you will want to consider before investing. These next few points are important and will save you both time and money:
- Many foreclosed homes have sat vacant for months and in some cases even years. This can lead to maintenance issues. Before buying a foreclosed home, it is important that you get a home inspection so you understand the total cost of the maintenance that will be needed in your new investment.
- A typical inspection will cost between $400-$500 dollars and will give you a report on: The home’s structure – cracks in the foundation, condition of the roof.
- Mechanical problems such as plumbing and electrical. Condition of the main appliances as well as the hot water heater, gas leaks, furnace.
This is an important first step that will give you a far broader picture of the overall cost of your distressed home and whether it is a sound investment or a money pit that you should walk away from! In addition to the maintenance costs that you are most likely to encounter with your foreclosure sale, make sure to seek out all the information you can about the history of the home. This information will help give you a better understanding of the previous owners, any renovations that may have been done as well as any liens, zoning laws or bylaws that may be applicable to the property. Don’t forget! Neighbours can be a great source of information about the home’s history so make sure to talk to them. Also, look at the overall neighbourhood and some of the other properties to see if this is the right investment for you! Keep reading because later in this post I will give you my final opinion as to whether buying a foreclosed home is a good investment or not.
7) What expenses will I have when buying a foreclosure home?
When it comes to buying a destressed home, it is important to understand all the costs that you will exncounter on this investment jouney. Here is a list of some of the less obvious and even hidden costs that are associated with a foreclosure sale and tips on how I can help you reduce these costs!
Some good news:
As your Real Estate Agent I am pleased to provide free advice that will help you avoid some of the common pitfalls and mistakes that are often made when purchasing a property. The seller, in this case the bank, is responsible for all realtor fees. Other fees that you as the buyer are not responsible for including any liens against the home, outstanding property taxes as well as strata fees. These costs will be cleared off the title at the time of sale. Unfortunately, you are still responsible for the property transfer tax, which is taxed at 1% on the first $200 000 and 2% on anything greater than $200 000 up to $2 000 000. After $2 000 000, the property transfer tax is 3%. Other important costs to keep in mind:
- Professional Cleaning.
- Renovations – including plumbing and electrical issues as well as replacing or repairing appliances.
- Changing the locks and re-keying your home.
- Any costs or damages that may have occurred from the time you viewed the home to the day you take possession.
8) Essential tips to keep your costs as low as possible:
Gently used appliances and materials will help you keep costs down for all major renovations.
Shop around and get free quotes to keep costs down. A professional cleaning service should cost you roughly $250-$300 for the entire house. Do as much labour as you can; this includes an initial cleaning, mowing the lawn and basic landscaping.
9) Is a foreclosed home a good investment?
A foreclosed home is a great real estate investment, if you understand all the costs associated with the project. A general guideline is that you should never pay more than 70% of the property’s estimated market value.
Here’s the deal: Instead of looking for cheap homes, you should look for good value in a foreclosure sale because the property’s true value is the total of renovations as well as initial purchase price.
A foreclosure property is not a deal if:
Repairs + renovations + purchase price = more than or equal to property’s estimated market value!
The best part:
If you are in the market for a foreclosure home, the great news is that the Greater Vancouver rental market is in high demand for apartments. This low vacancy rate offers great returns on a rental property with many units in the area renting for between $1800 and $2500monthly. This high rate of return with the need for rental properties ensures that your real estate investment is sure to generate revenue!
To take full advantage of the low mortgage rates as well as the ultra-competitive and low vacancy rate, it is imperative that you act now. We would love to help you find the perfect foreclosure sale and get you started on the journey of turning that distressed home into a revenue generating investment! Act now, it is the right time and the right investment!
Fill out the form below, and we will send you the full list of foreclosure and distress sale properties in the Greater Vancouver Region, totally free of charge and with no obligation:
|To view HOT Condos & Town Homes in Foreclosure
|To view HOT Single-Family Homes in Foreclosure