Another great question - I hope that I will be able to convey an equally great answer.  Today's Real Estate question comes from Sally M. calling from Saugus.  Apparently Sally has inherited some $$$ from a relative of hers and wants to jump into the Foreclosure Market feet first.  We are taking it slow with Sally due to the current market.

However, I thought this would make a great topic of discussion.  With Foreclosures, you have a few of different profiles. First let us establish our terms:

- All Foreclosures have completed the "foreclosure process". That entails, attorney's, court filings and probable evictions.  After that process has played itself out, you will need to find out who the owner is.  The Foreclosure could have been sold back to the bank that owned the loan for the property.  It could also have been acquired at the Auction by someone (an individual, investor, corporation etc...)  There could have been a group of investors that are working with a investment oriented real estate agent to represent them at the auction and then assist them with flipping of the home.  It might be part of a "bulk" sale from bank to bank, bank to investor, or bank to market.

Now that you know the possible types of ownership when it comes to Foreclosure properties - Here is the skinny.

  • Bank Owned / Real Estate Owned - All they want is the most net profit and the buyer that will stick it out and close escrow.  If they have a Conventional at 50% down versus a much lower cash buyer - they are going to choose the conventional offer. Same Cash and Same conventional - they will choose the Cash. FHA Loan Versus Conventional - Depends on the shape of the property. The interesting thing about that line up - FHA versus Conv. is that we have seen the banks choose FHA over Conventional. The reason this is, as some would say, is that the FHA appraisers are a bit more liberal with their values on Real Estate.
  • Investment Owned - Usually managed through banks or Management Companies.  These will depend on how many people have to "bless" your offer and what their individual opinions are related to the best types of financing.
  • Flips - Smaller Scale - Private: If they are getting what they want - they will take cash all day long.

The Tricks and Strategy:  Make sure you know what the home is valued at. Find out Fair Market Value via one of our Market Snapshots or talk with your Realtor.  Once you are armed with the actual value of any particular Foreclosure - you can then make sure your Real Estate agents submits comps with your cash offer to establish to the "owner" you know what you are doing.  Cash works - the best position to be in is both Highest and BEST - Highest equates to the seller making the most profit.  The BEST indicates the type of payment that will be rendered. Cash is king, Conventional is Queen and FHA is a Prince.

Don't get me started - but V.A. Loans are not even on the "competitive" scale :-(