Foreclosure Friday: Time to Make an Offer
Looking back, that Saturday went by so fast! Given that we were renting near the foreclosed home, it was our first, and only, stop. Driving up to the neighborhood, my husband and I were pleasantly surprised.
It’s a cute, quaint little neighborhood with well kept houses and landscape; adjacent to a more prominent, nicer neighborhood with a large community park and lake. As with many foreclosures, this home’s yard could use some maintenance. Our agent informed us it had been sitting vacant for awhile which was something we needed to know for the home inspection process, but that will be discussed in a later blog.
My husband and I went through the home and instantly fell in love with it. The vaulted ceilings, amazing windows, and loft-like aspect made the home feel very spacious and airy (I’m a big natural light person). We talked for a few minutes and instantly felt overwhelmed with what the next step meant… time to make an offer! Given that this home just recently hit the market, within the last two days, we needed to make an offer, and we needed to do it fast! As first time homebuyers, I sought the approval of my parents to make sure we were making a sound financial commitment, and did my research on buying a foreclosure. After their approval we went to our agent’s office to draft up the paperwork. I remember being inside the conference room panicking; having to take deep breaths regularly. Our agent was terrific; she walked us through the entire process in terms that we could understand.
First, we needed to have all the financing in order. We had already been pre-qualified for a certain amount, but needed to get that in writing to submit to the bank with the formal offer. Then we needed to look at the comparative market analysis (CMA) which is a report of active listings in the neighborhood, pending listings and recently sold listings of comparable homes. And comparable homes meant similar in square footage, year the home was built, similar amenities, upgrades and condition, etc. With this information we were able to determine what the fair market value was to make an offer on the home. Inside the offer number we needed to take into account the closing costs. When buying a foreclosure, keep in mind that closing costs are not usually as negotiable as with a seller. Factor those additional costs, which can be 2-6% of the price of the home, as money needing to be brought to the table or-in some cases-can be rolled into the mortgage.
Finally, our agent suggested that we mention this offer was contingent on a home inspection and that we request an answer within a week. Given it was a bank owned property, we knew it was going to take a while to hear something back.
And weren’t we surprised at what we heard back the next day – stay tuned for next Friday!