With the housing market on the rebound, homebuyers have slowly seen some of the great advantages of the last few years disappear. Housing prices are on the rise, interest rates have quickly increased towards 4 percent, and buyers have seen increased competition when looking for a new home. However, there remains one bright spot for buyers looking to find a great deal on their home: foreclosures.
Foreclosures are a great option for investors, first-time homebuyers and people looking to move up to a nice home. Though home affordability has lowered slightly with increased mortgage rates, buyers can still find great deals. If you’re in the market for your next house, here’s everything you need to know about snagging a foreclosure.
Great Deals, While They Last
According to the National Association of REALTORS, foreclosed homes are still being sold at incredible discounts, at an average of nearly 20 percent below market value. As the housing supply continues to shrink, foreclosures can provide great deals in a market that is seeing increased prices and higher rates. Unfortunately for homebuyers, foreclosures dropped 33 percent from May 2012 to May 2013. Luckily for buyers, there are still plenty of foreclosed properties if you know where to look.
Where to Find Foreclosures in 2013
Obviously, buying a foreclosure is contingent to find one. While many areas are still flush with foreclosed properties, states like Vermont and New Hampshire have hardly any foreclosures to choose from. Foreclosure tracking firm RealtyTrac released a list of the top 10 states for foreclosures. Foreclosures will vary by city, but if you are looking for a new home, here are a few top places to start.
Focus on Specific Neighborhoods
Just because you find a foreclosed home doesn’t mean that it will be in an area that you want to call home. Rather than finding any distressed property near a certain area, you should spend time to focus on certain neighborhoods that you would be willing to live in. Research property values, drive through your chosen neighborhoods and keep an eye out for foreclosure signs or a home that isn’t as well-kempt as its neighbors.
Keep Your Offer Simple, Include Cash
When it comes to offloading their foreclosures, banks definitely prefer buyers ready to offer quick, simple deals. With a dwindling supply of foreclosures, it’s likely that you’ll be bidding against other buyers, so you’ll have to move quickly and be ready to spend more upfront than you might have planned. A larger down payment and fewer contingencies will help your offer stand out, especially against buyers looking to take advantage of low-deposit financing like an FHA loan.
Find an Experienced Lender
Many banks have begun selling their foreclosed properties at auction, where it can be difficult for first-time homebuyers to compete with cash-heavy investors. If you want to compete against investors for distressed properties, it’s important to identify the property you want and meet with your lender to secure adequate financing approval before the house goes to the auction block. Experienced mortgage lenders like New American Funding can work with your real estate agent to give you a leg up on the competition.
If you’re having a hard time finding foreclosed houses in your area, it may be that banks in your area have allowed sellers to avoid foreclosure with a short sale, which can also lead to significant savings for buyers. Short sales allow the homeowner to sell the house at a price lower than what they owe on their mortgage to avoid foreclosure, which can lead to low prices for buyers. On June 5, 2013, Fannie Mae introduced a new tool to help streamline the short sale process, so be sure to ask your real estate agent and lender about alternatives to foreclosures if you’re looking to save some money on a great home.