10 Things to Know Before Buying a Foreclosure in Birmingham Alabama
Here are 10 things to know before you buy a foreclosure in Birmingham, Alabama.
1) In order to make an offer on a Bank Foreclosure, you must have the following ready:
- Pre-approval letter stating that the income, assets, and employment have been verified by your lender.
- Proof of Funds Letter (statement showing current bank account balance)
- Copy of earnest money check that has been delivered to the Realtor listing the property.
- Fully Signed and completed Sales Contract and all applicable addendum with no financing or home sale contingencies.
2) Can I use my own closing attorney and title insurance company?
Typically, the bank will require you to use their own closing attorney and title company to do the closing and underwrite the title insurance on the property. They have already researched the chain of title, and are familiar with the bank regulations, however, they will pay for the title insurance which saves you approximately 1/2% of the purchase price.
3) What if my lender cannot close on time?
You may be charged by the Seller (bank owning the foreclosure) late fees for any extensions. This is why it is imperative that you are fully pre-approved.
4) How did the Bank arrive at the asking price and is it a good deal?
The Selling Bank will consult with their listing agent and set the price at full market value. The list price has nothing to do with the price the bank will accept. We will research prior mortgages on the property so that you can get an estimate of the minimum the bank might be willing to accept. Understand that it is just a guess as different banks have different pricing strategies.
5) If there are multiple offers, how can our offer stand out?
Having a larger deposit, waiving any financing contingency and showing proof of funds will get the Bank to want to work with you, even if your offer is less. They don’t want to take a risk on an offer that has tons of contingencies.
6) Choose the right experience real estate agent!
Make sure that the agent you choose to work with is:
- Experienced in working with the banks who own the properties.
- Represents you as a single agent!
- Knows how to structure deals to make sure your interests are protected.
- Has purchased foreclosures themselves.
7) What if the property needs work?
The Bank WILL NOT make any repairs. They sell the property AS-IS. For this reason, you have an inspection period to make sure the property is the right property for you. Some foreclosure homes are excellent condition and some are in absolutely terrible condition. Either way, you should do a home inspection after your offer is accepted.
8) What if I don’t like the property?
You typically have 7 days to review the property, perform any inspections necessary and decide if you like the property. Your deposit is fully refundable within the review period.
9) How much will the bank take?
Typically, the bank looks for a price that is within 5% of the asking price. If the bank is asking $350,000, and you offer $280,000, it is almost certain that the bank will reject your offer or give you a counter close to list price. The rule of thumb is that if the bank would accept $280,000, then they would ask close to $280,000. In recent years, the banks have started to price their homes so that they will sell quickly. This is a change from the days only a few years ago when they would price high in hopes of getting as much as possible. Keep in mind that even if the If they don’t get their original price, then they will lower it every few weeks until they get a contract.
10) Do I need to get Title Insurance on a foreclosure?
NEVER EVER and I mean NEVER buy a foreclosure without having a title search performed and obtaining an Owners Title Insurance Policy.
Contact us with any questions you have about buying Birmingham Foreclosure Homes.