If you are like many, the idea of purchasing a home in foreclosure is an attractive idea. Most attractive is the idea that a home could be purchased for less than market value, thereby allowing faster equity building in the home.
The foreclosure market in Missoula, MT has been busy over the past months. If you are considering looking at homes in this category, there may be a few things you want to consider to best prepare yourself for things that the bank may require.
1. Pre-Approval: As with any home purchase, it is very important to speak to a lender and get pre-approved prior to making an offer. If you are not prepared, a bank will likely not even consider your offer. Also, if more than one offer should come in on the home, you want to be fully qualified so that your offer will compete in the best possible way.
2. Bank-Specific Pre-Approval: Some foreclosed homes may require that a potential buyer get pre-approved through their bank. For example, many foreclosures will state “Bank of America pre-approval required with all offers.” It is best to keep all the information that you needed for the pre-approval with your choice lender together so that you can provide it to a specific bank for their pre-approval, if required. When a bank requires something like this, you are not required to actually use them for your loan, just get approved to their standards.
3. Submitting an Offer: Some foreclosures in Missoula, MT are similar to a typical Buyer-Seller situation where a Buy-Sell is written and submitted to the bank. However, other homes may require that a Buyers’ agent submit the offer online, such as HUD foreclosures. If this is the case, you generally just have to submit a small amount of information to get your bid in the running (such as loan amount, closing costs, social security numbers, whether or not the home is going to be a primary residence, etc.). Then, the bank will review the offers and if yours is the one selected, you will then be required to complete the contract (usually on their contract paperwork, rather than a traditional Buy-Sell). It is good to know how you will need to submit your offer up front, as each foreclosure could be different, depending on who is holding the loan.
4. Primary Residence vs. Investment: Some foreclosures will only allow Buyers who are purchasing the home as a primary residence to submit offers within the first 2 – 4 weeks. Again, this is dependent upon each specific home. However, if you are an investor, you may not be allowed to purchase the home until the set time has run. If a Buyer comes along to purchase the home as a primary residence in that time, an investor may never get a chance to submit an offer on the home.
5. Inspectors, Insurance Agents and Experts: Due to the fact that banks can put demands on closing times, inspection times, etc. Due to this, it is most beneficial for you to have a plan of action in place if your offer should be accepted, such as knowing what inspector you want to use, what other experts you might want to have look at the home, and what homeowners’ insurance you want to use. Keep in mind that foreclosures represent a large loss of information about the home. Since you are dealing with a bank and not a prior owner, you want to make sure that you fully inspect the home and know as much as you can about the current condition of the home.
Purchasing a foreclosure can be a great investment. Keeping some of these things in mind could potentially help the process go a little smoother.