Make the most of foreclosure tours
Bus tours of foreclosed homes are a surprisingly good way to see a wide range of repossessed homes in just a few hours.
They began in the summer of 2008 and are continuing to be offered in areas where a significant number of foreclosed homes are available, such as Tucson, Ariz., and Florida's Palm Beach County.
With another 2 million foreclosures expected in 2009, there shouldn't be a shortage of properties to peruse.
So hop aboard and take these rules of the road with you. They'll ensure you get the most from your foreclosure tour:
Rule 1. Sign up for tours run by buyers' agents.
Most are, but you should ask just to be sure. Buyers' agents make good tour guides because they approach the properties with your needs in mind, not the sellers'. You need an agent who's personable, knowledgeable and, most of all, candid about the properties you're seeing. (That's why you don't want to be hauled around by the listing agent who represents the banks.) Since you're looking primarily at distressed properties, you need an agent willing to discuss all of the repairs needed and how much you can -- and should -- knock off the asking price.
Rule 2. Pick a tour that's easy to sign up for and hits the right neighborhoods.
The tour should be free and a brief phone call is all it should take to reserve your seat. Move on if the agent hosting the event insists on a lengthy interview or demands that you fill out an application that asks for detailed financial information. Ask if the bus will be stocked with drinks and snacks, even sandwiches if the tour extends over the lunch hour. Most are. And since most tours are limited to a few relatively close neighborhoods or suburban communities, make sure you ask where the bus will be going. Don't waste your time looking at homes in places you don't want to live.
Rule 3. Don't even think about buying one of the homes you see.
You'll only see seven or eight properties on the typical three-hour tour, representing a wide range of prices and sizes. On the tour we took, asking prices ranged from $145,000 to $519,000. Use the tour to identify one or two of those homes that come closest to what you're looking for. Using that as a guide, the agent will locate seven or eight similar homes for you to choose from.
Rule 4. Be prepared for the terrible shape many of these homes are in.
Eviction is not pretty. Many families must move out quickly and some bitter owners take their frustrations out on the home they're being forced to leave. Expect piles of trash, stained carpets, smashed and defaced walls, broken light fixtures, missing appliances and stopped up plumbing. Bring a flashlight. The electricity may have been turned off and you'll need one to take a close look at closets and basements.
Rule 5. Consider repairs to be part of the deal -- not a deal breaker.
If you want a well-maintained home you can move into tomorrow, then you shouldn't be shopping for a foreclosure. The fact that a foreclosed home needs a lot of work enhances your bargaining power. It's why you should wind up paying at least 10% to 15% less than you would for comparable homes in the same neighborhood, even after you've made all of the repairs.
Rule 6. Don't be discouraged if the asking price seems too high.
You'll probably be given a copy of each home's MLS (Multiple Listing Service) entry, which includes the asking price. If it's not any cheaper than other homes in the neighborhood, don't be surprised. Just because a property's in foreclosure doesn't mean the price reflects that. A good buyers' agent will tell you if the listing is overvalued -- ours did. He told us that one property was probably worth $60,000 less than the asking price. Here's how to find a good agent.
Rule 7. Tap the expertise of your fellow bus riders.
Most will be investors looking for rental property with the potential to appreciate -- a lot. That can work to your advantage because investors are generally well-educated about the market and will ask important questions about the property. They've also seen many homes, so any thoughts they can offer may be especially helpful to first-time buyers. Here are some hints on how to avoid mortgage mistakes.
Rule 8. Don't feel obligated to use the lender on the bus.
You shouldn't be surprised if a mortgage broker is along for the ride. Feel free to ask him or her questions about the preapproval process and mortgages in general. A lender on hand can also confirm whether the bank or seller has already agreed on a certain dollar amount, and can help arrange financing that includes money for repairs. However, just because a lender is on the bus doesn't mean they'll give you the best deal. You'll want to shop around and be sure that you get the best rate possible.
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