5 Steps to Buying Foreclosed Homes in Denver
Buying a foreclosed home in Denver can be daunting unless you know how to take the proper steps. When you are buying foreclosed homes, the most important thing to have is PATIENCE. The banks that own the foreclosed homes seem to have their own schedule and way of doing things. So, be patient. However, the following steps will give you a brief outline of the required steps and move you closer to a smooth transaction.
Step 1. Get pre-qualified with a reputable lender. Most sellers and particular banks will want to see that you have the capacity to buy the foreclosed home if they sign the offer to purchase. Most reputable lenders will provide you with a prequalification letter after running your credit report and taking some basic information over the phone. Many investors will make cash offers. If this is the case, you will need to provide “proof of funds” with your offer. Proof of funds are typically bank statements that prove that you have the funds in your account and are ready to close.
Step 2. Work with a real estate broker that has experience in buying foreclosed homes and will represent you. When buying foreclosed homes there are no guarantees from the seller or the bank. The listing agent typically represents the seller. You want someone to represent your side of the transaction and lookout for your best interests.
Step 3. Now that you have your pre-qualification letter or proof of funds as well as a broker to represent you, you are prepared to start looking at properties and make offers. Don’t be afraid to make offers if you have the right contingencies in your contract. Make sure you have inspection contingencies, finance contingencies, appraisal contingencies. All of these contingencies if properly written will allow you to get out of the contract if certain things happen such as the inspection doesn’t meet your requirements, the financing does not work out or the property doesn’t appraise for the contract price. These contingencies will allow you to get out of the contract receive a refund of your earnest money.
Step 4. In most cases when you’re buying a foreclosed home in Denver, the property will need to have work done prior to occupancy whether you’re going to live in the home yourself or if it is a rental. Use the inspection period to have your contractors take a look at the work that needs to be done and provide you with estimates. Even though you may plan on doing most of the work yourself, many times when you go through a property with a contractor, they will point out things that you totally missed. It gives you another set of eyes and ears. Once you have all of your estimates of the work that you are going to require, review the numbers. Make sure that the after repair value is still within your required parameters and you are not paying too much.
Step 5. Once your due diligence has been completed, the contract has been submitted to your lender as well as your completed loan application, the lender will assign an appraiser to come out and appraise the home. In addition the listing agent will order the title commitment and the title company will start to organize the closing. This is all done behind the scenes by the lender, the title company and the listing and selling agent. In the meantime, have your contractors and everything ready to go so that as soon as you close, you’re ready to begin work.
These are 5 essential steps to buying foreclosed homes in Denver. Follow these steps and your purchase should be fairly smooth.
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Do you have questions about buying foreclosed homes? Contact Dunn and Company and we will gladly discuss the process and your investment options with you.
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