The process for buying a foreclosure is slightly different from that of a traditional home on the market.
Some people come to this decision because they have decided they specifically wanted to seek one of these deals out, and others were simply looking at buying a home in Las Vegas and found a property that met their desires that happened to be a foreclosure property.
Whichever camp you fall into, it pays to learn more about the process ahead before you dive in.
What is a Foreclosure?
A foreclosure is a home being sold by a bank, rather than an individual homeowner.
When you take out a mortgage to purchase a home, the bank lends you the money under the agreement that if you don’t make your payments, the bank can repossess the home and then sell it to help make up the losses on their investment. When banks do this, sales are known as foreclosures.
The Advantages and Disadvantages of Buying a Foreclosure
The biggest reason people are looking for foreclosure properties is to get a deal. There are a few reasons you may get a better deal when buying a foreclosure, including the fact that the bank is looking to recover their losses and is often interested in a quick sale.
These properties also carry more risk, however. We’ll look further into that in a moment, but the added risk of these sales earns buyers a discount.
It is important to note that in recent years, the discount you get on these properties isn’t as high as it once was. Investors were buying foreclosed properties left and right in Las Vegas, and banks decided they would renovate some of their properties and sell them for more.
There is often still a discount, and a risk, but the discount is less than it used to be on homes the banks have decided to renovate.
The risk of a foreclosure is that you don’t know the history of the home.
The seller has to disclose any known issues with the property to you. These steps protect you against buying a home with such issues as a mold problem or a severely damaged roof.
You don’t have any of these protections with a foreclosure. You are buying the property “as-is”.
Another thing to keep in mind when purchasing a foreclosure is that the bank isn’t taking any of this personally. So, they don’t care who they sell to as long as they get the most money possible.
If there are other buyers interested right now, they will go with them instead of negotiating with you. If you have a real estate agent, you can consult with them to know how fast foreclosures in your Las Vegas neighborhood are selling right now.
The Steps To Buy a Foreclosure
1. Decide You Want To
The very first step is to accept the risk and decide this is the right deal for you.
2. Hire An Agent
If at all possible, find a real estate agent familiar with the process of buying a foreclosure.
You want a person on your side who knows the road ahead and who can advise you on the process.
They will know the local market, laws, and possibly be familiar with the bank you’re buying from.
3. Get Pre-Approved For Your Mortgage
If the bank receives two offers, one from buyers who are pre-approved and one from buyers who are not, they will be much more likely to want to move forward with the ones who are already approved for their mortgage.
This is a strong negotiating tool. It tells the bank you are serious and ready to move forward right away with the sale.
4. Research Comps
If you have a real estate agent on your side, you can ask them to run a comparative market analysis (CMA) for you.
If you are on your own, what you want to do is research similar properties that have recently sold in the area. You want to compile them in a folder, and then go over them all at once.
Compare each property to the one you want to buy, and then consider the price they sold for. Take an especially close look at any that were foreclosures.
5. Consider Your Offer Carefully
If you have an agent, they can advise you on what the market is like and if other foreclosures are selling fast in your area right now. If they are, you may have to bid higher.
Keep in mind that banks aren’t going to be as interested in negotiating on foreclosures. If they have a high bidder, they will go with that person.
You don’t need to feel pressured–there are always other properties–but if your heart is set on this one you’ll want to consider all the information you have carefully.
Keep in mind that if the bank has invested in renovations, they will not be as interested in a quick sale, they will be more interested in getting a good return on their investment.
6. Remember the Sale Is “As-Is”
As you’re making an offer and going through this process, you need to always keep the risk in mind.
Get a home inspection so you have as much information as possible.
Remember that the bank doesn’t have any information; they never lived on this property. Be informed as you move forward.
You’re Buying A Home In Las Vegas!
Despite the few key differences in the process and the risk involved when purchasing a foreclosure, you are still buying a home in Las Vegas.
The main points of the process–getting a real estate agent, looking at properties, making an offer, and eventually, moving in–are still essentially the same.
As long as you are well-informed of what is involved and accept the risks, a foreclosure may be a good opportunity to buy a house and get a bit of a deal in the process.
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Give The Urban Nest Team a call at 702-580-9198 to learn more about local areas, discuss selling a house, or tour available homes for sale.