There is a large difference in investing in a pre-foreclosure home and a foreclosed home. Once the banks have purchased the home back, and are setting up the bidding wars, there are certain things you must keep in mind in order to increase your chances of winning the housing bid. Let’s take a look at some of the things to keep in mind before you push your paddle to the sky.
It is important to understand the market value of the area around the house. While a bank would love to sell a foreclosed home, they are not going to be sloppy with their money. Banks have realtors also and understand what a house should sell for. Banks also understand that foreclosed homes are not going to sell for exactly market value, so knowing what the value is, will help you to price your bidding strategy.
Keeping the market value in mind will also help when it comes to setting up your maximum bids. When you know what the house will sell for once it is fixed up, you have a gauge on how much you will make. Of course, even if you did have an idea about market value, you couldn’t determine your expected profit until you analyzed the current value of the house.
There is a large difference in investing in a pre-foreclosure home and a foreclosed home.
CC image courtesy of Jay Santiago
Buying a foreclosed home is different then standing on the courthouse steps and purchasing a pre-foreclosed home through a bidding war. With the courthouse situation, you do not get to look at the house before you bid on it, as-is style. With foreclosed bidding today you get a chance to walk around inside of the house and figure out if you would like to bid on it.
Once you analyze the value, you have a little more wiggle room with the banks. The banks know they will not get full market value for the house. They understand that the sale price on the foreclosed home will be dependent, somewhat, on how much renovating will need to be done. Therefore, the bank is willing to let the price slip south a bit.
With knowing the market value and estimating the current value of the house, or the cost to fix the house, it is also important to know what your maximum limit is. When bidding on a foreclosure, you must keep in mind not only the fact that you are buying a house, but you must also have a budget to fix it up where needed. Knowing your limit will help you decide what the highest bid you can place will be.
If you are using a credit purchasing system, which most people do today, make sure you have cash to put down on the house. This will help your chances of winning the bidding competition because the bank will get part of their money back immediately. To the banks, cash is like waving a top-secret clearance badge on a military base. It is almost a free pass to their hearts. Even if you plan on flipping the house, having a bit of money to put down will almost always ensure that you win the bidding war.
Foreclosure bidding strategies are pretty straightforward. Know the market value, understand what it will cost to repair the house in the current condition, know your limit in respect to the repairs that need to be made, and bring cash with you to flash around and show you are serious. Now get out there and win those bids.
Monica Hampel blogs at Uanema News where your financial questions are answered. She is free from debt.