People tend to talk about bank foreclosures in a general way. When you hear that buying a foreclosure can save you money, no one ever seems to talk about the best way to ensure savings. Usually, people end up referring mostly to foreclosure auctions, probably because they represent the culmination of the foreclosure process, and because they are considered the sale most open to the public.
What people don’t talk about very often is that getting the best savings at auction can sometimes be difficult. An auction is an outright competition with other buyers. The heat of the action often drives the price up beyond what you intend to pay going into the sale, and if it’s a premier property in high demand, look out. Your chances of winning it for the price you want go way down the more people bid at auction.
But for some reason, just as most people interested in buying real estate hire a an agent without considering the foreclosures market, people interested in buying foreclosures tend to go right for the auctions without considering other options, probably because it sounds most “convenient”.
A good piece of advice about buying foreclosures would be to start early. The more time you have to research a property, talk to those in charge of selling it and make a series of bids, the more likely you are to come to a reasonable bargain. The foreclosure auction, unfortunately, does not generally provide these opportunities. The pre-foreclosure however, does.
Pursuing a home right after it’s gone into default or been scheduled for a foreclosure is the most opportune time to push for a sale, because you get to deal directly with the owner instead of a repossessing bank, trustee or an auctioneer. The homeowner has the most invested in a sale, since selling before an auction afford them the chance to pay off their debt without having a foreclosure ruin their credit. They might even be able to walk away with a little money in their pocket to start over as well. Once a foreclosure goes to auction, there’s really no pressure for the lender to sell. There are all kinds of stipulations that can allow the lender to postpone the sale if they’re not going to get the price they want. The homeowner however, is under a deadline and will be much more open to bargaining.
Once you find pre foreclosure listings, try sending the homeowner a letter or giving them a phone call informing them that you’re sorry to hear about their situation, but that you’d be very interested in coming to a mutually beneficial deal. Avoid direct contact or knocking on their door at first, but if it comes down to it don’t be afraid to pay a visit. Most homeowners, if they are not responsive at first, will end up coming around and calling you back as time goes on. The closer their foreclosure date gets to reality, the more they’ll realize they will have to take action. And if you’ve been there offering a sale from the beginning, they’re very likely to turn to you, rather than hand their property over to a bank.
Remember, buying foreclosure homes is about being resourceful and clever. There are all kinds of options, so be sure not to pigeonhole yourself onto the road most traveled.
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Written by Alex Rolim.
