What Do I Need to Know About Buying a Foreclosure in Alabama?

You can get a great buy on a foreclosed property but there are some unique challenges you should consider:

We have had many successful transactions with foreclosures! Partnering with a knowledgable real estate team will go a long way toward helping your puchase of a foreclosure go smoothly.  Our services won’t cost you anything (seller pays our fee) so don’t go it alone – contact the Ramey Team!

Timing
Since foreclosed properties often are priced well and are considered “good buys” they usually sell quickly.  If you are interested in pursuing short sales or foreclosures, be sure you are ready to act quickly.  Get your financing lined up, do your research, consult with your Realtor, and keep in mind that most foreclosures won’t consider a contingency.  So if you have a house to sell before you can buy, a foreclosure might not work for you.  There may be delays (see Delays and Paperwork below) so if you need to be settled in your new home by a hard and fast date, you might want to forego the foreclosures.  Each situation is different so check with the Ramey Team for timing issues related to your specific situation and the foreclosed property which interest you – and we will try to work it out!

We can help you be the first to know when distressed properties hit our market, too!

 

Funding
Sometimes you can finance a foreclosure purchase with a mortgage and sometimes you have to have cash.  We have many local lenders who will finance a foreclosure for you but there are some out of state lenders who will not.  You’ll want to check with your lender to be sure they finance foreclosures before you make an offer on one.  Most sellers will require that you provide a pre-approval letter with any offer you submit on a foreclosure, too.

Cash buyers sometimes do have an advantage.  In competative bidding, a cash offer usually is viewed more favorably by the seller because it usually means a quicker sale with fewer complications.  Some auction sales require cash.  “According to the National Association of Realtors, 29 percent of all previously owned homes sold in February were either foreclosures or short sales, mostly the former. Nearly one-third of all home sales were cash, suggesting that a big chunk of the market is getting snapped up by investors.”  Read more: at NASDAQ community

FHA/VA optins – Yes, you can finance a foreclosure with an FHA or VA loan.  Just be sure you choose a property that is in good condition!  Since some foreclosures are in rough shape, condition may preclude FHA/VA funding.  There may be some cases where the seller will make repairs or your lender will allow you to include what you need to fix up the property in your mortgage.  We can help you navigate your way through these situations.

Some Fannie Mae-owned properties offer HomePath financing.  These can be especially good buys because mortgages funded through the HomePath program have low downpayments, no mortgage insurance, and offer options for both owner-occupants and investors.  For a list of local lenders who participate in this program and to find out which properties qualify, just contact the Ramey Team!

 

Repairs
Most foreclosures as sold as is and their sellers are not willing to do repairs.  Of course, we can always ask!  Keep this in mind and evaluate the cost of needed repairs as you calculate your offer on a foreclosed property.

For some forclosed properties there may be special financing options which allow you to include the repairs or rehab work necessary with your mortgage.  Contact the Ramey Team to learn more about these foreclosure financing opportunities.

 

Delays and Paperwork
Things have improved and there are hopeful signs that this process will see even more streamlining in the coming months but make no mistake, buying a foreclosure isn’t for the faint of heart!  You can expect delays – in response to your offer/counteroffer and other decision making and even delays in closing.  You can expect additional paperwork as well.  Most lenders are dealing with a large volume of foreclosures and the process is complicated and constantly in flex.  We can help you navigate the process and help you understand what to expect along the way.

 

Right of Redemption
There is a statory one year right of redemption in the state of Alabama.  This means the owner who lost the property in foreclosure has 180 days following the date of the foreclosure to reclaim the property.  This is very, very unlikely but it is something you should be aware of if you are comtemplating the purchase of a foreclosure.  For a former owner to reclaim a property, they would have to pay all of the defaulted amounts, costs and fees. These include the purchase price paid at the foreclosure sale plus interest, necessary permanent improvements made, taxes and insurance paid, and other costs and fees.  It’s hard to imagine if the former owner won the lottery or had some other reversal of fortune that they would return to a house they lost in foreclosure rather than moving on to bigger and better things. Nonetheless, there are a couple of things you should do when buying a foreclosure:

  • Find out when the right of redemption expires.
  • Keep good records during the redemtion period of any necessary improvement you make.
  • Make only necessary improvements – save the upgrades and additions for after the redemption period expires.
  • Consult your real estate attorney with questions or concerns.

For more detailed information, see “The Right of Remption in Alabama”

How to Find the Deals
Contact the Ramey Team and let us help you!  We can send you an email alert each time a new foreclosure is listed in our market or send you weekly alerts.  We can even customize that search for you.  Just let us know how we can help you.

 

Return to Buyer FAQs

 

 

 

 

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I Found The House I Want. How Much Should I Offer?

You’ve probably heard it’s a Buyers’ Market and while that’s still true, there are several things you should consider when making an offer.

  • Market value – we can help you determine if the seller’s asking price and your offered price are in line with comparable recently sold properties.
  • Condition – is it move in ready or will you have expenses for repairs or to make it the way you want it?  We always recommend a home inspection so you know what you are getting in to with any purchase . We can help you find a licensed home inspector and schedule it for you. We can also help you get estimates on repairs or improvements.
  • Days on the Market – how long has the home been listed for sale? If it’s been on the market for a while, the seller may be more willing to consider a lower offer. Sometimes a house stays on the market for a while because the seller is firm on their asking price so there are times when this strategy doesn’t work.
  • Motivation – how much do you really want this house? The closer you are to the asking price, the more likely your offer will be accepted. If you know you are competing for the purchase of a particular property, you might even want to offer more than the asking price. The bottom line is that you need to decide what’s most important to you – getting a good deal on whatever house you purchase or getting THIS house?
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What If I Don’t Have Much Money For a Down Payment?

You may be a good candidate for one of several homebuyer assistance programs or for some loans that require less or no money down.

There are still some 100% financing options for property located in certain areas so it is possible to buy a home with no down payment. Additionally, FHA loans have lower down payments, low closing costs and easier credit qualifying. We can help you find properties which qualify for those and to find local lenders who can help you get those kinds of financing options.

There is also help available for those who need down payment assistance. In most cases, you’ll have to meet certain income requirements but there are some local home buying programs available in Auburn and Opelika. Contact Cathy or Jack on the Ramey Team to learn more about these options.

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Should I Buy Instead of Rent?

Sometimes it makes sense to rent but in this market with great interest rates and rock bottom prices on inventory, you might be surprised at your buying power.

Why throw away your money each month renting if you can invest that money in a home of your own?

  • Check out this article on the subject of buying/renting homes – 4 questions to help guide you in your decision.
  • More help crunching the numbers is available from Smart Money.
  • This rent vs. buy calculator can be a helpful tool too.

The Ramey Team can help you evaluate your options.  Get in touch today to talk about renting vs. buying options in Auburn/Opelika.

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Why Should I Have a Home Inspection?

When you enter into a contract to buy a house, you have the option of having a home inspection. We ALWAYS recommend that you do – yes, even if the house is being purchased “as is” and even if it is new construction. If the inspection results are not satisfactory, you’ll have some options to accept the house as is, have the buyer address your concerns, or to back away from the contract.

This purchase is probably the single biggest investment you’ve ever made and you need to know what you are buying. A home inspection can help you be as certain as possible that your investment is in sound condition, that there are no material defects, and that there will be no surprises.

Alabama is a Caveat emptor state (“let the buyer beware”) so the buyer needs to exercise due diligence in inspecting, evaluating, exploring, researching, etc. prior to the closing.

In short, the buyers should do whatever they need to do to satisfy themselves that the house is in acceptable condition.

We can recommend several licensed and qualified home inspectors and can even schedule and attend those inspections for you. We’ll be glad to tell you more about what to expect from your home inspection but the bottom line is yes, we strongly recommend you have a home inspection on any property you offer to purchase.

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What Is Earnest Money?

Earnest money is paid by the buyer and it accompanies an offer to purchase property. It is a good faith gesture on the part of the buyer, indicating to the seller that they are serious enough about their offer to purchase that they are willing to “put their money where their mouth is” with this up front payment. The amount of earnest money can be negotiated in each transaction.

If the offer is accepted, the earnest money is immediately deposited in the escrow account of the seller’s real estate broker. It remains there until the closing and neither the buyer not the seller (or their agents) will have access to that money.
At the closing the buyer will receive that earnest money back as a credit toward the purchase price.

The buyer may forfeit the earnest money to the seller in the event the buyer backs out of the transaction without cause. Check your specific purchase contract for the details related to earnest money in your transaction.

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Can You Show Me Properties Even If They Are Listed By Another Agency?

Yes! If you don’t already have an exclusive working relationship with another real estate agent, we can show you anything currently on the market. You don’t have to bounce from one real estate agent to another. We can show you any property listed in this area because we are members of our local Multiple Listing Service (MLS).

You get to choose which real estate agent you want to work with and how you want them to represent you. Choosing the right agent can save you time, effort and aggravation in finding the perfect home at a price you can afford or selling your home quickly for top dollar. We’d love to help you find your new home or sell your existing one!  Learn more about our credentials here.  Get in touch and we’ll tell you more about what we can do for you.

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I Am Not Sure If I Can Qualify For a Mortgage – Or If So, How Much? What Are My Options?

Check with a lender.  Your credit rating, your income and your debts are all things which will factor in to the equation when a lender is determining if you can qualify to buy a house. The best way to find out if you can qualify for a mortgage is talk with a financial professional at a bank, credit union or mortgage broker. Each lending institution may have different types of loans available to fund your home purchase at different terms and interest rates so it can be a good idea to talk with more than one.

In some cases, if you are borderline, you may not qualify in one place but can qualify in another.

We can recommend several local lenders who would be glad to talk with you and we’ll be glad to explain the whole qualifying process to you in more detail.

If your lender says you do qualify – great! Now you know exactly the price range you should be exploring for your new home.

The lender can provide you with a pre-approval letter which shows any potential seller that your offer is strong and it is something that is required when you make an offer on a foreclosure or short sale property.

Of course, you can do some estimating on your own using this handy Affordability Calculator and more.

You can also check your own credit score by contacting these reporting agencies:

Want to get together and talk about your financing options?  Just get in touch with us today to set up an appointment to chat.

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I’m In The Market For Buying a New Home. Is There An App For That?

Yes!  Download mobile search apps here:

  • The Ramey Team mobile search13384

Also, here’s an article from Market Watch that tells you all about a lot of handy apps for the home buyer

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I Found The House I Want. How Much Should I Offer?

You’ve probably heard it’s a Buyers’ Market and while that’s still true, there are several things you should consider when making an offer.

Market value – we can help you determine if the seller’s asking price and your offered price are in line with comparable recently sold properties.

Condition – is it move in ready or will you have expenses for repairs or to make it the way you want it? We always recommend a home inspection so you know what you are getting in to with any purchase (link back to #5 for more info). We can help you find a licensed home inspector and schedule it for you. We can also help you get estimates on repairs or improvements.

Days on the Market – how long has the home been listed for sale? If it’s been on the market for a while, the seller may be more willing to consider a lower offer. Sometimes a house stays on the market for a while because the seller is firm on their asking price so there are times when this strategy doesn’t work.

Motivation – how much do you really want this house? The closer you are to the asking price, the more likely your offer will be accepted. If you know you are competing for the purchase of a particular property, you might even want to offer more than the asking price. The bottom line is that you need to decide what’s most important to you – getting a good deal on whatever house you purchase or getting THIS house?

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