Foreclosures are seen in the San Antonio real estate market, and may continue for the immediate future. While there are deals to be had in the Bexar County foreclosuremarket, buyers must also be aware of the downside to buying homes in foreclosure.
Be Aware of Auctions
Unless you’re a seasoned real estate investor, it’s best to avoid auctions, for a number of reasons:
Most banks will not accept loan contingencies in an auction, so don’t expect to be able to negotiate any.
Bids are sealed, which means you won’t know what anyone else is bidding. You will need to do your research and determine such factors as the market value and the neighborhood, and then add to that any repairs that you’ll need to make.Banks will also typically expect a large, earnest money deposit, so you’ll need to be prepared to immediately pay that.
Lastly, and surely most importantly, most properties in a foreclosure auction must be purchased “as is.” This means that the property will not be available for inspection, which means you could have a potential nightmare on your hands if the property requires substantial renovations and repairs.
When considering your bid at an auction, an important question to ask yourself is: Will the amount of money I have to put into this property to bring it to market standards offset the cheaper price I paid for the property?
Many homeowners in foreclosure will stop caring for the property and will stop making repairs. Still, others will destroy the property in retaliation. It is also not uncommon for homeowners to sell appliances and kitchen cabinets before vacating the property.
You will also be responsible for removing the occupants of the property, which typically involves an eviction process. Often times it is easier to bribe or pay the occupants to leave the property than to go through an eviction process.
With this said, buying a home in foreclosure is usually not recommended for first-time buyers.
Wait for the Property to Hit the Market
If a foreclosure is in your sights, you may want to avoid auctions all together and wait for the bank to put the property on the market. These properties are often referred to as “bank owned” or “real estate owned (REO).”
Again, do your research and determine the fair market value of the property beforehand. Then, if you feel that the home is overpriced, you can ask the bank for a short sale, which means that the bank will sell the property for less than the amount owed on the mortgage.