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What Stopping You From Buying An Investment Property
Buying a foreclosed property may be a great way of buying an investment property. It does have a process that differs from a regular sale. Knowing the process gives you a leg up on the competition and an advantage to avoid potential problems.
1) The process takes longer than a standard home sale. Foreclosure homes are owned by banks and goverment sponsored lenders. These banks and lenders have their own contracts that are required to be signed in addition to the standard home sale documents. It takes extra time for the lender to prepare and provide their contracts to be signed. If the paperwork is not completed as instructed by the lender, it will be rejected and you may lose out on the property.
2) The bank has an asset manager assigned to handle the sale for them and get as close to the asking price as possible. The bank will keep dropping the price over time if no acceptable offers are presented. If your offer is not accepted the first time, it is a good idea to make another offer when the price drops. Especially offer again if you are close to the new asking price. You have to be willing to play the game and wait to get a lower price.
3) Always expect to receive a "Highest and Best" offer request. There are a lot of buyers looking at foreclosures and it's very common to have multiple offers presented. The asset manager will request all bidders to present their Highest and Best offer. It is a good strategy to start with a little lower than your max offer, so that you have room to increase.
4) Work with an experienced Realtor who specializes in Bank REO (Real Estate Owned) properties. Inexperienced agents can cause you to lose the offer on the property or money out of pocket paying for inspections & appraisal costs. Platinum First Realty is an experienced brokerage representing banks and lenders to sell their foreclosed properties for years. Kathy McKinney, Realtor has been an REO Specialist for over 10 years.
5) Foreclosed properties can be in rough condition. They can be rundown and have deferred maintenance and if left vacant even more issues. Former owners can cause deliberate damage and remove appliances, kitchen cabinets, etc. Some banks have improved properties prior to selling to help them sell quicker.
6) Have your financing in order before starting to look at foreclosures. No bank foreclosed offer will be considered without proof you can purchase. If you are using cash funds or a line of credit, your Proof of Funds must be presented. If you are financing your purchase, a pre-approval from a lender detailing your qualification must be presented with your offer. If you do not provide either proof of funds, or pre-approval to purchase, your offer will be denied immediately.
7) Financing can be more difficult on Foreclosure properties. Lenders generally will not provide financing on properties that are unlivable. Example; utilities cannot be turned on due to damage, leaks or flooding, kitchen cabinets missing, carpeting removed, etc. There are lenders who will provide financing on foreclosure properties, if you would like a referral let me know.
8) The bank is selling the property in "AS IS" condition. Do not request to have the bank make any repairs to the property. You are not permitted to make any repairs to the property until you have purchased it. Even if your lender will not approve the loan until the repairs are completed. If you want to do inspections, which are recommended, you are responsible to pay to have the property de-winterized (approx. cost of $200 - $400).
9) Don't expect quick answers, banks move at their own speed, be willing to give them time. Make sure you follow the instructions set by the bank as closely as possible and meet all deadlines. The less you rock the boat and hold on for the ride the better the sale goes.
Hope this Helps,
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