Tuesday, April 28, 2009

Top 3 Big Mistakes Made by Rookie Foreclosure Buyers

As I drive down Lexington Avenue from my Ham Lake home toward Blaine, I often pass a watchful hawk perched on the power line scouting for his next meal. This redtailed bird of prey makes my REALTOR® mind go to thoughts of the some of the buyers I am currently seeing in the Twin Cities real estate market sitting on the sidelines ready to swoop in on a well priced home. In this market that is often a foreclosure or REO home. Unlike the hawk, which is poised for action, instinctively ready to make a kill; a rookie foreclosure buyer is in many cases left without a deal or worse yet can feeling like the prey rather than the one who got the killer deal on a property.

How does this happen? There are many bargains and good foreclosure real estate deals across the Twin Cities metro. I see bargains in throughout Anoka County and in Chisago and northern Washington County too. Affordable homes are everywhere! Even a first time homebuyer should be able to get a good deal, right? Absolutely! But they need to avoid rookie mistakes.

Three most common mistakes made by first time foreclosure buyers:
1. Not knowing when to lowball

Some people have the idea that since they have an abundance of properties on the books, banks would be willing to accept any price offered. This is simply not true. Before a bank puts a home on the market, they send an appraiser out to the home to get a market value assessment. Often the homes are then MLS listed with a REALTOR® and that agent will also advise the bank on the best price to get the home sold. When the foreclosure home comes on the market, it can be at a very attractive rock-bottom price! In many cases the banks will receive multiple offers on well priced homes immediately after listing. In these cases, REO properties are selling for thousands MORE than the asking price. Buyers that lowball in these situations lose out.

2. Not working with a trusted professional

The internet has left some rookie buyers thinking they are real estate experts that can make a good deal going it alone. This is a very scary scenario when buying a foreclosure. The bank's agent works for the bank and often the bank does not allow dual agency. Without representation you are flying solo. Signing a buyer’s representation agreement with a REALTOR® doesn’t cost anything. Think of your agent as YOUR “hawk’s eye” on the market to find you the great deal you are searching for.

3. Not prioritizing pre-approval

When buying a house, the old adage “look before you leap”, should be changed to, “get pre-approved before you look”. This is one of the biggest mistake I see people making in this market as a bank will not consider a home without a pre-approval letter with income and assets verified. (In the case of buying with cash, having a proof of funds letter is essential.) An offer on a bank-owned home will not be considered unless you are pre-approved. If you scout out that killer deal and don’t have the paperwork ready, your offer will be out of the running in any multiple offer situation.

Education is key to making a great foreclosure deal. Watching like a hawk for that great deal is only part of the equation. Having the resources in place and a professional REALTOR® by your side when you swoop in and make your offer is the way to get the deal!

Copyright 2009 Teri Eckholm http://www.terieckholm.com/