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Many buyers look to foreclosures in an effort to get a deal when buying a home in Washington. But there are some things you should know about buying a foreclosure, which we will explain in this article.
Washington State ranks pretty low in the entire country in terms of share of delinquent loans, which range from about 3.5% to 5%, according to the Mortgage Bankers Association (MBA) and CoreLogic. This past September 2021, only about 200 housing units went into foreclosure out of just over 3.1 millions housing units.
In some ways, buying a foreclosure home in Washington State is similar to a “regular” real estate transaction. In other ways, it’s very different. So it’s important to have a basic understanding of the foreclosure buying process before you take the plunge.
Here are 9 tips for buying a foreclosed home in WA State.
In a traditional real estate transaction, the home buyer deals directly with the homeowner who is selling the property. Even though the communications are often conveyed through real estate agents, the buyer presents an offer directly to the homeowner(s).
Buying a foreclosed home in Washington works a bit differently. For one thing, the homeowner is out of the picture. Houses get foreclosed on when a homeowner defaults, or stops making the mortgage payments.
The home is essentially repossessed by the bank or institution that funded the purchase, and then the house eventually makes its way back on the market.
So, when buying a foreclosure property in Washington, the buyer will typically present his or her offer to the bank or organization that now owns the property. Additionally, the process of buying a foreclosed home can sometimes take longer than a typical transaction (where a homeowner is involved).
In a traditional home sale, homes are typically spruced up and staged to attract the masses of buyers, whh often prefer a home that is in move-in ready condition with minimal work to do.
It’s why buyers include a home inspection contingency in their offers, which gives them a chance to scope out a home in detail to uncover any potential issues with the home that could throw a wrench in the deal.
Such is not the case with a foreclosure. These properties are sold as is, which is something that buyers must be entirely comfortable with. It’s possible for a major issue to be identified after the home has been bought and sold. At that point, the buyer will have to put in the time, effort, and money to fix the problem.
You can add a lot of value to your home by making upgrades and renovating it. Doing so can add instant equity into the property. But another important factor that some buyers might not consider when it comes to appreciation in property values is the surrounding neighborhood.
The area that the foreclosed house is located in should ideally be a desirable one. A good neighborhood will support the value of the home over time. So, before buying a foreclosure, make sure to scope out the neighborhood and look for things like nearby amenities, healthy businesses, well-kept yards, good schools, and low crime rate.
Also, check out how many other foreclosures are in the neighborhood. If you notice quite a few foreclosure signs on front yards in the area, then it might be a sign that property values in the area are still on the decline.
While you might not have the luxury of going inside the home and checking it out in great detail, there’s nothing stopping you from driving by the place. At least it will give you the chance to check out the property from the outside, which in itself can give you a good idea of the condition of the property.
An online listing might be a great way to get introduced to a foreclosure, but it will never give you the full scope of the property. Checking out a listing online only could mean you might miss important aspects of the home, such as the backyard.
If a property you see online meets your criteria in terms of location, size, and number of bedrooms and bathrooms, then it’s worth it to visit it in person, if possible.
Unless you’re a veteran real estate investor who has purchased foreclosures in the past, you’ll want to work with an experienced real estate agent. And in this context, “experience” means someone who has helped clients buy foreclosed homes in the past.
We just talked about some of the ways that the foreclosure buying process differs from a regular transaction. So it’s wise to have someone on your side who understands the process inside and out.
An agent can help you find a property, evaluate the price, and write an offer in a timely fashion — and those are the basic steps to success.
The best-case scenario is to find a real estate agent / broker who works directly with banks or companies that actually own foreclosure homes in your target area. At the very least, you’ll want to find one who understands the basic steps involved in the buying process. Remember, it’s not a typical real estate transaction.
Unless you plan to pay cash for the home, you’ll want to get pre-approved by a mortgage lender before making an offer. The pre-approval letter will outline how much money you can borrow, based on the lender’s review of your income and debts.
It’s always wise for borrowers to get pre-approved before entering the real estate market. But it’s especially important when buying a foreclosure home in Washington. The market for foreclosed properties tends to move quickly.
There are bargains to be found, and a lot of buyers and investors are competing for those bargains.
Efficiency is key when shopping for a foreclosed home in Washington State. These properties tend to get snapped up quickly, due to the fact that they’re often priced below market value. So you’ll want to be ready to make an offer at a moment’s notice.
This is where market research comes into the picture. Before trying to buy a foreclosure property, spend some time researching the local real estate market. In particular, pay close attention to recent sales prices for similar properties.
This will help you (A) validate the seller’s asking price and (B) spot the best deals.
A HUD home is one that was foreclosed on by a homeowner that was carrying a government-backed home loan, like an FHA loan. These properties are listed on the HUD website.
If any one of these properties catches your eye and you are interested in putting in an offer, you’ll need a real estate agent to help you out. These properties move through the market quickly because there are good deals to be found.
If you find a home you like and feel like it’s a good deal, you’ll need to move quickly. This is yet another reason why having your finances in order and getting pre-approved for a mortgage is important.
Websites like RealtyTrac specialize in foreclosure listings. So if you’re serious about buying a foreclosed property in Washington, those sites are a good place to start.
But don’t stop there. Using multiple search sites will give you even better coverage. Most of the major real estate listing websites allow buyers to search for foreclosed homes.
Look for a search option that says “listing type” (or something similar), and then check the box for foreclosure or “REO.”
Did you know? REO stands for “real estate owned.” This label is used to describe homes that have been foreclosed on, and are now back on the market. REO properties are typically owned by banks, government agencies like HUD, or government loan insurers like Fannie Mae.
So there you have them, five tips for buying a foreclosure home in Washington State!
Whether you are looking to buy, refinance, or just have questions about your home value, consult your trusted home mortgage expert at Sammamish Mortgage today. Let the professionals at Sammamish Mortgage guide you. Family-owned and operated since 1992, we know what you value. Let us help you understand the ins and outs of home financing and more. Sammamish Mortgage offers a variety of mortgage programs to borrowers in Washington State, Oregon, Idaho, and Colorado. Please contact us today. We look forward to serving you.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.