Even though the inventory of foreclosed residential properties is low compared to what that inventory was during the height of the housing bust, there are still “deals” to be as long as the specific property is in the location and physical condition the prospective client and/or investor(s) want. Foreclosed properties, however, play by different rules than “regular” properties. Competent, experienced real estate agents know those rules and the specifics behind them.
With low inventory and buyers expanding their options, agent must know the different types of foreclosures:
- A pre-foreclosure or short sale occurs when the homeowner still owns the property. Because the homeowner still owns the property and knows the foreclosure potential, a short sale can take awhile. The patience of the agent is key to the client in this situation.
- An auction of a foreclosed property usually requires that the buyer pay with cash. This can be risky as there may be undisclosed liens on the title, unknown repairs that may be costly and it may not be possible to have the property appraised. The agent should point out all of these contingencies to the client.
- A post foreclosure or REO, real estate owned by the bank/lender, property is one acquired by the bank at auction. The bank will likely have an agent representing it as the seller so the bank can recoup its expenses. A buyer/investor cannot approach the bank with an offer. Agents: Become REO listing agents and ensure your buyers have inventory to choose from!
- A government owned foreclosure is a property that the government is selling “as is” in order to get its money out of it. The potential buyer may or may not be able to “view” the property, may or may not be able to have the property appraised/inspected and the buyer will be responsible for any and all repairs. An agent may be able to negotiate with the government’s agent on viewings, appraisals, inspections, repairs but only the buyer’s agent, not the buyer her/himself.
All the usuals become “must do’s” for a prospective buyer/investor when dealing with a foreclosed property. They will need your help as an experienced agent. Become a pro at finding (or learning how to find) the following information:
- Familiarize yourself with the lender who has the property.
- Know the process the lender goes about in selling their foreclosed properties
- Learn the specific state laws and regulations that pertain to foreclosed properties…each state is unique.
- Spend time in the assessor’s office to determine the ownership, title, liens, pricing information, etc.
- Learn to evaluate if your clients buying/investment goals align with the property in question.
A well versed, experienced foreclosure agent is essential in maximizing the potential profits and minimizing the potential risks/losses involved with foreclosure for their buyer, so don’t avoid learning this critical area of the housing sector.