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Tips For Buying A Foreclosure In Cape May County

Tips For Buying A Foreclosure In Cape May County

January 16th 2019

If you’ve ever bought a home before, odds are that you took the traditional approach: spent time browsing through home listings in your desired area, used a Realtor to show your highlighted properties and submit your offers, then go through loan options and personal finances to prepare for closing costs, down payments and the loan approval process. Buying a foreclosure is a whole new animal, so before you consider buying a foreclosed home, it’s important to know what you’re getting into, what to expect, and how to go about buying a distressed property.

What Is a Foreclosure?

A foreclosure is the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments. A foreclosed home now belongs to the bank, which once belonged to a homeowner.

What’s the Difference Between a Foreclosure and a Short Sale?

A short sale is when a mortgage lender allows an owner to sell property for less than what's owed on the mortgage. The home is still owned by the homeowner, and the bank has not yet taken possession through foreclosure proceedings. 

What Is a Sheriff’s Sale?

A sheriff's sale is similar to a foreclosure auction. At a foreclosure auction, a lender is selling a property it repossessed, whereas in a sheriff sale, the property was repossessed by a lender through court-ordered means.

What’s The Best Way To Buy A Foreclosure?

1. Find An Agent And Brokerage That Specialize In Distressed Property Sales

Banks will often hire real estate brokers to handle their “real estate owned” properties, or REO. Banks prefer to continue working with the same brokers if they’ve had success and easy transactions in the past, so when you browse through foreclosure listings, you will often see the same brokerage handling the listings for many of the properties. This is a sign that the brokerage is an REO specialist.

It’s a good idea for foreclosure shoppers to first visit any site with a database of foreclosed homes. If you’re shopping for a foreclosure in Cape May County, you should look at our website that lets you filter the results to see only foreclosures.

The REO specialists at the Coastal Marketing Group have a long-term relationship with the banks, and they know about foreclosure listings that haven’t hit the MLS yet. Contact us about the listings that you’re interested in and ask them about listings that may be coming up. Sometimes it takes a few days to a week for the property to come onto the database.

2. Get Your Finances In Order And Have A Preapproval Letter Ready To Go

Unless you plan to pay cash, you’ll need a preapproval letter from a lender. This all-important letter will explain how much money you’re able to borrow, based on the lender’s assessment of your personal finances.

Buyers will often think that they can find a home first, and then work out the financing. The problem with this approach is that the good deals – the REALLY good deals you’re shopping for – go quick, so buyers may not even have time to try to work out financing even if they have great credit. Work out financing first.

Buyers shouldn't assume that the bank selling the foreclosure home will also finance their mortgage. The foreclosure purchase and mortgage process are two total separate transactions, especially in the bank’s point of view. The bank team that works on the REO properties has one task — to get rid of the bad asset. They are not loan officers.

3. Make Sure You Look At Several Comps In Your Area Before Making Any Offers

Just like in traditional home transactions, there isn’t any ‘golden rule’ that dictates what the bottom line is for the home’s price, especially since a foreclosure home is owned by a corporation, not an individual. Just as with any other real estate purchase, you will need to look at the recent sales prices of comparable properties, or “comps.” Luckily, the Coastal Marketing Group has plenty of experiencing with submitting offers for REO properties, so they’ll walk you through the process.

4. Foreclosure Homes Can Sell Quickly, So Be Prepared To Bid The Higher End Of Your Offer Range

Foreclosure homes in beach towns like Cape May, Wildwood And Stone Harbor will always sell quickly. The best tactic to use on a bank-owned property is to come in at your highest and best offer. The exception would be if the property has been sitting on the market for a long time with no activity.

5. Foreclosure Homes Are Sold As-Is

 It’s important to keep in mind that foreclosure houses are sold as-is and in the condition they are presented in. Buyers shouldn’t expect to get discounts to compensate for repairs or issues with the property. If comps in the area are selling for a similar asking price, then be prepared to offer something competitive. Buyers shouldn’t expect to take $20,000 off the price to pay for roof damage, new carpets and paint if other foreclosures in the area were in the same condition and sold for a similar asking price.

Foreclosures Are Still A Good Way To Find A Great Deal

The takeaway point is to understand what to expect when buying a foreclosure home. Buyers who come into the process prepared, patient and knowing what to expect may find the process to be quick and painless. Buyers who aren’t ready, are in a hurry to settle, or don’t have their preapproval ready may have a tougher time. Before you buy a foreclosed home, consult with a specialist here at the Coastal Marketing Group and do as much research as you possibly can. Luckily for you, you don’t have to come into the process blindly. Our agents are ready and willing to help you find and purchase a foreclosure in Cape May, Wildwood, Lower Township and beyond. We have tons of REO sales under our belts and would be happy to find you a bargain at the shore.

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