Unfortuately there are many foreclosures properties in Calgary…
While you can buy some foreclosure real estate at below-market prices, it also brings a unique set of circumstances that you may not encounter in a more typical home buying scenario.
Many markets saturated with foreclosed properties, more prospective homebuyers are taking a closer look at these types of properties than ever before. Purchasing a foreclosure isn't just a simple matter of scoring a dirt-cheap bargain, however. What should you worry about--or not--when buying a foreclosed property?
Foreclosures being sold by banks have long been an attractive opportunity for real estate investors. But today many consumers are purchasing them as primary residences.
The big attraction of purchasing a foreclosure is the expectation that it can be bought at bargain-basement prices. Whether that expectation holds true depends largely on local market conditions and Terri Stephens with CIR Realty calls the "desperation factor" of the bank that needs to sell the property.
Foreclosure properties are just harder to deal with. Here's what you need to know…
"People want to get houses for half price, and that's not going to happen," says an industry member.
In general, Foreclosures do offer some discount from the market value of the property--anywhere between 5 percent to just over 30 percent. If foreclosure sales didn't come with some discount, there would be no reason for buyers to deal with the myriad headaches that these transactions can present. Make no mistake, short sales come with headaches, so you need to know what to expect.
Even though Foreclosures can be a bargain, that doesn't mean you should jump in with your eyes closed. "Foreclosure buyers need to do their homework so they understand the property, the market, the neighborhood, and the process,"
Here's what you need to know as a potential buyer of Foreclosure property in today's market.
Real estate agents can pull up foreclosures offerings for you. Most mortgage lenders want their REO properties listed on the multiple listing service (MLS) so that any real estate agent can show them to potential buyers.
Discounts on foreclosures vary greatly, depending on whether the homes are severely damaged and where they're located. Although damaged Foreclosures might sell for a relatively minor discount -- 5 percent to 7 percent off comparable private sales of non-damaged homes -- some might offer as much as a 30 percent discount.
But being listed as an Foreclosure doesn't mean that a property will automatically be a bargain. Banks are in business to make money, so of course they're going to price homes as competitively as possible. This is why it's important to have solid representation on the home you plan to purchase.
Foreclosures are sold "as-is," and that's why you need a home inspection before committing to a purchase. A thorough inspection is even more important for an Foreclosure than for a standard property.
Be financially savvy
I encourage potential buyers to get prequalified for a loan so that the seller knows the borrower will be able to close.
If you want to buy an Foreclosure property, will you have trouble getting a mortgage? If the property you're considering is in good condition, you shouldn't have more trouble qualifying simply on the basis of the home being Foreclosure, and likewise, you won't pay higher mortgage rates just because the lender knows you want to buy Foreclosure.
However, a significantly damaged property may close off some options for financing, because few mortgage financing programs exist for these types of homes.
Closing may take awhile…
Bidding on an Foreclosure isn't quite like making an offer on a privately-owned home, where you hear back from an owner fairly quickly. Instead, you'll submit your bid then you'll wait for a response with a counteroffer. Since a bank is a business, you may end up dealing with more than one person or department, and it can take awhile to get all of the paperwork processed.
The process can be frustrating and take more time. On the other hand, because the home is an Foreclosure, the bank will already have taken care of any liens on the property, so your title search should be a breeze.
It's possible to turn a fixer-upper into your own personal castle, as long as you are patient and don't expect that an Foreclosure listing means an automatic windfall.
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