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.”