Reviewing some considerations that should go into buying multi family homes in foreclosure directly from banks.
Buying multi-family homes in foreclosure directly from banks is an option that can help you build your real estate investment portfolio and get you an affordable place to live without paying full price. Before you purchase a multi family home in foreclosure directly from a bank, there are several things you should know.
There are essentially two ways a bank will dispense with a property in foreclosure: at auction or through direct sales. Most multi family homes in foreclosure with a bank interest are sold at auction. The important things to be prepared for when considering a multi family property foreclosure auction are:
Have cash for your deposit most auctions will require a minimum deposit toward the purchase of 10 percent of the accepted bid price and you’ll have to have that deposit in the form of cash, a cashier’s check, a certified check or a money order.
Have financing in place if you’re successful in bidding on a property at auction, you will have a limited time to pay the balance (sometimes as little as 30 days) so having your financing pre-approved is a good idea. Many banks will require you to pre-qualify before entering into the auction and you’ll need to have a letter certifying your pre-qualification status from your lender.
Do your homework property auctions are fast-paced and oftentimes are not held at the property itself. You will want to have all your research done prior to going to auction, including thoroughly understanding the condition your property is in and doing some research into any potential liens or attachments to the property. In the case of multi family properties, know if there are existing tenants, what rents they are paying, the status of those rents and if they are comparable to rents in the area.
While a property auction can be stressful, you will know the results on the day of the auction. That’s not always the case when buying directly from a bank. Direct purchase of properties that have been foreclosed on by a bank or that are in foreclosure with a bank can be a drawn-out affair. They start out like any other property purchase wherein you work with an agent, make an offer, and then wait and wait. Banks do not always disclose when there are multiple offers submitted for a property in foreclosure. They also don’t always immediately inform prospective bidders if the financial circumstances that led to the foreclosure have been resolved while offers have been submitted. You can also have your offer rejected by the bank with little or no explanation for why.
While multi family homes in foreclosure may be a great opportunity, buying them directly from a bank has its unique challenges. Enlisting the help of a qualified real estate professional will be key and QualitySmith can help by connecting you with one today.