Troy Stavros, Broker and Partner with the 865 Real Estate team says, “Buying a foreclosure in Knoxville may seem like it should be just as easy as buying any home, but there are certain factors that make it more tricky. While some of the processes and procedures are the same, there are steps to take and things you should know going in, to help make the outcome a positive one.”

Below are the Top 5 Things To Know About Buying Knoxville Foreclosures:

#1: Forget the Auctions – If a buyer is reading this, then most likely they aren’t a seasoned veteran of buying distressed properties. Why should novices steer clear of auctions? The auction process is far more risky. First, prospective buyers don’t get a chance to inspect the home for damage or issues (two factors that are more common than not in a distressed property, because of the fact that the home may have sat vacant for a period of time or had unhappy owners leaving). Second, potential buyers don’t have a chance to find out if there are any outstanding liens on the property for which the buyer will ultimately be responsible. Third, there is a chance that when buying at an auction, the owner that was foreclosed on may still be living in the home. Another big headache that can be costly from both a dollar and stress level. Fourth, most auctions require cash on hand, or the ability to pay the entire purchase price within a few days. This is not an option for most buyers.

#2: Buy From A Bank – All of the reasons to buy from a bank are the complete opposite of the reasons above. First, buyers get the opportunity to inspect the property. Second, the bank is required to pay off all liens and back taxes. Third, the owner will be long gone once the bank has foreclosed and if not the bank will have them removed prior to listing the home. Fourth, buyers have the time to get financing in place like a typical home sale.

#3: Get Pre-Approved – This is a step in the home buying process that the 865 Real Estate team stresses whether buying a home in Knoxville that is distressed or non-distressed. To have the best opportunity to secure a home when negotiating, the buyer must be able to provide a pre-approval letter from a lender with any offer submitted. Most banks will not even accept an offer on a foreclosure without one. Not to mention, that by providing a pre-approval letter showing that the buyer has the ability to secure financing, is a serious motivator for any seller.

#4: Expect a Low Appraisal – Once the deal is agreed upon with the bank and the financing secured, there is one more hurdle to leap over, the appraisal. Appraisals have been know to come in low on distressed properties because of neglect, vandalism, or damage. A lender will only lend a buyer the amount for which the home appraises, so until that number comes in, don’t breathe easy. Also if a buyer is planning on utilizing an FHA loan, there are additional strict regulations regarding the condition of the property, so FHA may require repairs to be completed prior to closing the loan.  For more information here is an article we wrote regarding “How To Get Top Dollar Out Of Your Home Appraisal“.

#5: Be Prepared To Spend Money On Repairs – One of a distressed home buyer’s best friends should be a Knoxville contractor. Even before negotiating, a buyer should have an estimate from a contractor as to the price of repairs. Stavros stated, “Because of the neglect and disrepair of most foreclosed homes, the repair list can be extensive and expensive. Know what costs are involved and incorporate those costs into the negotiations and the bottom line price.”

Troy Stavros, Broker and Partner with the 865 Real Estate team stated, “Even though the Knoxville real estate market may change with ebb and flow of the economy, the reasons people buy homes in Knoxville and beyond pretty much stay constant.” The following list of reasons was garnered from the research done by the National Association of REALTORS for their 2012 Profile of Home Buyers and Sellers Report. The list below starts with the most cited reason and descends in order.

Top 10 Reasons People Buy Knoxville Homes

#1 REASON: Desire To Own A Home Of My Own in Knoxville

#2 REASON: Desire For A Larger Knoxville Home

#3 REASON: Job Related Relocation or Move to Knoxville

#4 REASON: Change In Family Situation

#5 REASON: Affordability Of Knoxville Homes

#6 REASON: Desire To Be Closer To Family/Friends/Relatives in Knoxville

#7 REASON: Desire For A  Home In A Better Area

#8 REASON: Retirement

#9 REASON: Desire For A Smaller Home in Knoxville

#10 REASON: Desire To Be Closer To Job/School/Transit

Responses varied among age and home buying experience. The report showed that younger buyers were more inclined to buy because of the desire to own a home (this reason was cited by 60% of first time home buyers), while older buyers (those in the 65 and older category) cited the desire to be closer to family and friends and retirement as the primary factors for buying.

The home loan process can be daunting for seasoned homeowners, let alone first time home buyers. Paperwork, paperwork and more paperwork, followed by credit checks and more required documentation.

Troy Stavros, Broker and Partner with the 865 Real Estate team at Gables & Gates, REALTORS says, “Today’s strict lending guidelines can call for even more steps in the process, but with a plan it can be done with less stress.” The following steps should be taken prior to searching Knoxville real estate, in order to make getting loan approval a smooth, successful endeavor:

STEP 1. Start pulling together documentation prior to starting a Knoxville real estate search. Mortgage experts are recommending starting 6 months to a year prior to beginning a home search. Why so early? There could be credit issues to resolve, debt that needs to be paid off, or down payment money to be saved to allow for approval. Those things take time. Waiting too long can hit a buyer twice as hard, by coupling the denial of a loan with the loss of a dream home.

STEP 2. Get pre-approved prior to starting a home search. This is a major step that anxious buyers like to skip over that can cause heartbreak. A pre-approval (not a pre-qualification!), uses complete documentation and gives a buyer the green light from the lender that should a home be found, financing is approved and available. By not completing this step prior to a home search, many buyers are looking at homes in price ranges they cannot afford. This leads to frustration and heartbreak, when a buyer realizes the perfect home the search has found is out of reach.

STEP 3. Most new buyers understand that saving up for a down payment is necessary but many are not aware of closing costs. The down payment and closing costs can be two significant numbers, and buyers need to plan on saving up for both prior to beginning a home search. Closing costs can vary, but a general rule of thumb is to plan to pay around 3-4% of the purchase price.

With current inventory levels of Knoxville Homes For Sale, as well as nationwide levels well below normal, home buyers are finding themselves in situations where they may have to compromise. Gone are the days where buyers had their pick of the litter and could find multiple homes in their price range that had everything on their wishlist. A recent study by the National Association of REALTORS clearly shows on what criteria home buyers are more willing to budge.

The study was broken down by home buyer type. For example: single, married, male, female, unmarried couples, children under 18 in the home, and no children in the home. The number one compromise across all groups was price. More people were willing to go up in price and secure other elements they refused to give up. The 2nd and 3rd largest compromises were very close across all groups and consisted of a compromise in the size of the home, followed by the condition of the home. The criteria that home buyers were least willing to compromise on, across all groups, were distance from schools and quality of schools. Quality of the neighborhood also ranked low on the compromise list.

Troy Stavros, Broker and Partner with the 865 Real Estate team at Gables & Gates, REALTORS says, “When buying Knoxville Real Estate, one of the keys in having to compromise less, is working with a Knoxville real estate agent that keeps close tabs on the market and watches as new homes matching your criteria come available. In a market with low inventory and high buyer competition, good homes sell very fast. Oftentimes the first offer in wins.”