Many people ask, "How do I buy a Foreclosure Home?"
A Foreclosure Home can generally be purchased just like the next resale home, with a loan from your local bank, mortgage company, or any other type of residential lender. Some foreclosures will need substantial improvements to qualify for normal financing and some sellers will offer you owner financing, but most prefer you to get your own financing locally.
You must have a pre-qualification letter or proof of funds (for cash offers) to submit an offer. Most sellers will not negotiate without it.
A foreclosure home generally sells in 90 days or less, as they are generally priced below market and appraisal. It is not unlikely to have multiple offers so you don't want to low ball when you make an offer or your offer might not ever be considered. You may lose the property to someone else without having a chance for a counter-offer. Besides, they are generally priced right to begin with.
Contingencies, Earnest Money, and Disclosure
Generally, Sellers of Foreclosure properties will NOT negotiate a contract if the buyer's contract includes a sale contingency or depends on the sale of other real property.
Earnest money of 2-3% of the purchase price or $1,000 minimum is the normal amount that the Seller will require to hold the property. Earnest money just shows good faith on the part of the buyer and is credited to the buyers at closing.
The seller has never occupied the foreclosure home and will not provide a disclosure statement.Generally, there will be an addendum attached to an offer that explains this and other terms of the contract. You DO have the right to an inspection of the home, but the seller is under no obligation to make any repairs. Generally, foreclosure properties are sold AS-IS. You buy it and fix it up yourself and you can sometimes save a good deal of money.
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