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Buying a Distressed Property

November 14, 2013

Although the worst of the housing crisis is over, there are still plenty of homes for sale that are either in a short sale or a foreclosure. Buyers are often attracted to these properties because of their low pricetags, but nervous about the process, and worried about maintenance issues.

The most common problems that come up with a distressed sale are the condition of the home, the uncertain timeline between offer and closing, and competition with investors. If you’re prepared, you can avoid these pitfalls and get your dream home at a bargain price! Read below to find out how.

Dealing with the condition of the home

A home in foreclosure has often been vacant for some time, and regular maintenance has sometimes been neglected. If you’re looking for a deal, you’ll have to see past the cosmetic issues (a little elbow grease will go a long way here) and get an information-only home inspection to make sure that there’s no hidden issues to deal with. Most foreclosures and short sales are sold as-is, so your home inspection will just be to protect you from buying a home that needs more maintenance than you’re prepared to give.

Preparing for an uncertain timeline

Distressed sales, especially short sales, can take a long time to be approved by the seller’s lender. If you’ve got a specific deadline of when you need to move, buying a home like this may require you to find a temporary rental to stay in until closing.

Securing Competitive Financing

Often, investors snap up foreclosures and short sales in order to turn them into rentals, or fix them up and “flip” them. Serious investors can offer cash for a property. Your offer may be in competition with cash offers, which are more attractive to sellers and banks. If you can’t pay in cash, make sure you have a pre-approved mortgage and a hefty downpayment ready so that you can make a serious offer.

Do you have a question about purchasing a foreclosure or short sale? Leave it in the comments below, and one of our licensed and experienced realtors will help you out!

Image from Trulia

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