Tips for buying foreclosed property

Buying a foreclosed home brings challenges, mixed feelings about being able to capitalize on someone’s misfortune, and opportunities to gain a foothold in the housing market.

For those up for the challenge, it can pay off big time – whether it’s gaining access to a highly desirable neighborhood, customizing a home to suit your style and needs, getting a good bargain or return and resell the property for a profit.

Dick Leean agent for eXp Realty and director of client relations at Independent Mortgage, said that to find foreclosed or pre-foreclosed homes on the market, interested buyers can visit the multiple listings service (mls.com), call the city or town tax department, or talk to sheriffs and police.

Other experts cited additional sources:

Auction.com or hubzu.comDave Seymour, CEO of Liberty Venture Investments and a former star of A&E’s “Flipping Boston”

■ Newspaper advertisements — Peter Souhleris, real estate investor, broker and co-founder of CityLight Homes who also starred in “Flipping Boston”

foreclosure.comMonette Valliere, an agent at Keller Williams Elite/The Ponte Group

■ The US Department of Housing and Urban Development website, hud.govJazmine GlasgowVice President of Maritime Mortgage Corp.

Don’t go alone

After identifying a home you want to buy, do your research and assemble a team, Valliere said.

“My recommendation would be to find the right people, before you even start the process,” said Young Lew, loan officer at Boston Mortgage Solutions. Lew, who is also president of Gaia Realty & Advisors and Gaia Management Inc., recommended finding an attorney to do a preliminary title search on the home to make sure there won’t be any impediments. for sale or surprises.

The title search should uncover any outstanding liens, Glasgow said.

Lee agreed, noting that as the buyer you would likely be responsible for paying liens, unpaid utility bills, etc.

“It’s very important when buying a foreclosed home to make sure you understand all the things you’re agreeing to in the purchase and sale agreement,” Glasgow said.

If you’re allowed into the home during the auction, you should bring a home inspector with you to help determine how much you’re willing to bid, Lee said.

Lew suggested bringing a licensed and insured contractor. Although the contractor may not be able to give an exact estimate for the work, you could glean valuable information about the condition of the house.

Bring a check

Don’t expect a standard bidding process. The procedure depends on what state you’re in, and each company often follows its own business models, experts said.

Despite these differences, you’ll likely need to bring a certified check for several thousand dollars to the auction in order to participate, Lew said. (It’s often $5,000, but it can vary by listing.)

Online auctions, however, may require a $5,000 deposit to bid, Seymour said, but it will be refunded if you don’t win.

Valliere suggested researching the price of a house of the same size in that area to determine what price to bid. She also recommended looking for “short sales”, which occur in the pre-foreclosure phase when current owners attempt to negotiate with the bank. In a short sale, the home is sold for less than is owed on the mortgage, Lee said. You can find short sales on hubzu.com, auction.com, and foreclosure.com.

However, these can be difficult to buy in the region’s hypercompetitive market.

pay everything

If you win, congratulations. Now let’s move on to financing.

Lew suggested taking out a rehab loan, which covers the cost of the house and renovations.

Financing options include loans from Fannie Mae, Veterans Affairs, and Freddie Mac, as well as a 203(k) from the Federal Housing Administration. Local lenders also offer loan products.

The real state of the house is added to the list of unknowns. Frequently, homes are auctioned “blind,” Souhleris said.

He suggested searching online for photos of the house when it was last on the market and trying to determine how much damage it might have suffered.

“Make sure you have the spare funds to fight one of the unknowns,” Glasgow said, “and be patient.”

Seal the deal

The process of buying a foreclosed home can be complicated and time consuming. Foreclosure closings can be delayed for months, Glasgow said, given there are so many players, including but not limited to the former owner’s loaner, legal teams and the company of auction.

“You have to understand that you’re probably getting a good deal, but there will be a lot of unknowns,” she said.

Buying a foreclosed home can also have an emotional impact. Sometimes the buyer can be responsible for evicting previous owners, which can lengthen the process, Lee said.

You may find yourself bidding in front of the house while the current owners are still inside.

“The hardest part for me, personally, is seeing this situation where a little kid is looking out the window and saying, ‘What’s going on, Dad? “Said Souhleris.

Although buying foreclosed homes can get very complicated, it can yield great results. “Go with the following mindset: ‘Hey, this may take a long time. I may not be able to get what I would normally want, but I’m getting a good deal. This should be a plan to long term for equity,” said Glasgow.

Dylan Dhindsa can be reached at [email protected]. Follow him on Twitter @DylDhi. Subscribe to our newsletter at pages.email.bostonglobe.com/AddressSignUp. Follow the address on Twitter @GlobeHomes.

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