Checking The Pulse Of The Kansas City Real Estate Market
Probably 1/10 of buyers who contact us to start a home search want to first explore bank-owned foreclosure listings. This can be a great idea for home buyers who are willing to make repairs and work to create quick equity in their real estate investments. The extent of repairs needed varies greatly from one bank-owned property to the next. Some need just minor cosmetic updating, while others need major structural repairs to get the home up to speed after closing.
Unfortunately some foreclosure listings won’t pass the appraisal process and thus can’t be purchased through traditional financing methods. If a home has major issues, such as the roof is shot or it has major foundation cracks, those items are sure to be noted on the appraisal. And that would likely cause the buyer’s lender to shoot down making the loan. Most banks won’t make any repairs (even minor items) nor will they allow a buyer to go into a home and make the repairs (even at their own expense) prior to closing, so be cautious. If a home looks like it needs major repairs and you’re only approved for typical conventional or FHA financing, you’ll probably want to steer clear of that particular home.
There are many foreclosure listings out there that will need a buyer who can either pay cash or who has creative financing lined up, possibly a FHA 203K loan (that allows for repairs to be financed into the buyer’s loan) or maybe a line of credit established. These types of financing aren’t mainstream options but are methods that could help a buyer move forward with purchasing a home that needs significant repairs. Also consider that many lenders won’t accept any type of FHA financing. In those cases the buyer must be prepared to pay cash or have conventional financing (minimum 5% down payment) in place.
So before starting the search for a foreclosure listing, just be sure you consider the many different possibilities you might encounter on a bank-owned property, such as… You might need to purchase the property with cash… You might need to have conventional financing in place… You might need to have a FHA 203K loan place… You might have to view many homes to find one that fits both your needs and threshold for repairs… History shows you are likely to shelve the idea of buying a foreclosure and end up purchasing a traditional resale that doesn’t come with the hassles and hurdles that many foreclosure listings require.
Posted by Jason Brown
