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Top Tips For Buying A US Foreclosed Property
April 10, 2009Article by Ray Withers
As property prices hit rock bottom across the Atlantic, more and more US distressed property is for sale at foreclosure. Foreclosure is the US term for the lender repossessing a property because the homeowner has fallen in to mortgage arrears.
Buying distressed US properties is a five-step process:
STEP 1 – Find a property. States that have been hit hardest by the price slump include the ever-popular Brit holiday playground of Florida, California and Nevada. Next, contact some local agents and establish what you feel is a fair market value for the property. If you plan to rent, you need some realistic valuations of rental return as well. Remember if the property is already a letting property and is going in to foreclosure, does that mean the projected rent was never attained?
STEP 2 – Work out your finances – consider the property purchase price, any repairs and maintenance and the actual costs of purchase. Your finances should cover this budget plus a little extra as a contingency plan. Don’t count on a mortgage – borrowing in the US is as tough as in the UK at the moment.
STEP 3- Put a buying team together of US professionals advisors together – an agent, a letting agent and a solicitor, all of whom can guide you through the foreclosure process.
STEP 4 – Contact the owner – depending at the stage of foreclosure, this can be the homeowner hoping to sell before the bank forecloses, a trustee appointed by the court or a lender.
STEP 5 – Prepare a pre-foreclosure bid – many properties can be snapped up for between 20% and 40% below market value. That’s today’s market, not last year’s or the buying price. If the trustee has scheduled the property for auction, play a waiting game and place your bid before the auction. Auctions don’t have to proceed and may be postponed or cancelled at any time. If you bid at auction, check the state laws before you go – some states require a cashier’s cheque to be paid over at the end of the auction. In the past few months, more than a third of property owners trying to get out of the slump have sold their properties at a loss. This includes developers with completed or partly constructed property on their hands that is now worth less than the land value and builds costs.
A typical Orlando development is Cane Island at Kissimmee, just a few minutes from Disney and the major theme parks. The developers state that the current Kissimmee property market means selling prices are less than build costs for the apartments. They need to sell to cover development finance and this means some strong negotiation can net bargains. Prices at the resort have tumbled since launching in 2005 with prices starting from $319,990 for a 2 bedroom fully furnished apartment, the same size units today are selling for $149,990 an astounding 53% less. The apartments at Cane Island are delivered fully furnished as a turnkey development.