Buying a foreclosed home in Maryland is a little different from buying a traditional property. You may save on the purchase itself, but foreclosed homes come with additional costs you might not be prepared for. Here’s what you need to know about buying foreclosed homes in Maryland.
When most people think of buying a foreclosed home, they see dollar signs. Foreclosed homes are priced well below their market value, which means you can get more home for the same budget or end up spending less on a home that fits your needs.
But the cost savings on the home purchase is just a small part of what you need to consider. A foreclosure is a special transaction that isn’t like a typical home sale. And if you’re using the low price tags of foreclosures as investment opportunities, understand the process is essential if you want to maximize your ROI.
Here’s what you need to know about buying a foreclosed home in Maryland.
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What Does Foreclosed Mean?
The term ‘foreclosed’ means that the owner of the home has defaulted on the mortgage and the lender has assumed ownership.
In Maryland, there are two types of foreclosed homes: bank-owned and real estate-owned (REO). The two are the same in that the lender is the owner (usually a bank). The biggest difference is the stage of foreclosure the home is in.
In a bank-owned property, the homeowner has stopped making payments. The bank owns the home and will try to sell it to recoup the money it’s owed. During this process, the bank is working to remove the homeowner from the home. These properties will go to auction, but this isn’t a guarantee that the home will be sold.
Real estate-owned properties are foreclosures not sold at auction. The properties have already been foreclosed on and have gone through the auction process unsuccessfully. The bank or lender will try to sell these homes and recoup the money through an REO agent.
Five Steps to Buying a Foreclosed Property in Maryland
Finding a bank-owned property can be as simple as searching online. But buying one of these properties isn’t as easy or straightforward. Here’s a simplified look at the process in five steps:
Get Pre-Approved for a Mortgage
Before you search for an REO property (or any property), make sure you can get a mortgage. Getting a mortgage pre-approval shows you’re a serious buyer, something that banks will look at favorably. It also gives you a price range to shop in, knowing how much your lender will give you to buy a home.
Explore Foreclosed Properties with Your Agent
It’s difficult to go it alone when buying a foreclosure. Real estate agents that are well seasoned in foreclosure transactions are your best resource. They can help you set realistic expectations, know what banks are looking for, make a presentable offer, and navigate things like home inspections and the closing.
Get a Thorough Inspection on the Home
Once you make an offer on a foreclosed home, the next steps can be tedious. Foreclosed homes are often vacant for weeks or months prior to being available for purchase, and banks don’t typically maintain them during the interim.
While you aren’t required to get a home inspection, you will want to on a foreclosure. The inspection costs about $400 or more, depending on your local market, but it’s a worthwhile investment to uncover potential issues.
The inspection won’t reveal everything that’s wrong with the home, but at least it can give you a good idea whether you’re buying a money pit or are getting a good deal on a home.
It’s also a good idea to move forward with a termite inspection, radon investigation, and a sewer and water line assessment. Maryland has an elevated level of radon compared to other states, and just about every county is at risk. The more you can find out about your home up front, the better prepared you’ll be to move forward.
Resolves Liens on the Home
Many foreclosed homes in Maryland have more than one loan, which means you’ll have more than one lien to resolve. Your real estate agent can recommend a title company in your area that can help you sort through liens and loans and uncover potential conflicts you may face.
Prepare for Problems and Have a Ready Solution
Because many foreclosed homes are ignored until a new owner takes possession, prepare yourself to do extensive repairs and maintenance upon moving in. You could face everything from electrical upgrades to plumbing problems, so make a list of what to tackle first to get your new house feeling like home.
Work with Clever to Purchase a Foreclosed Property!
Whether you’re thinking about buying a foreclosed home in Maryland or are already searching for listings, working with an experienced real estate agent can be invaluable to the process.
Clever Partner Agents are top-rated real estate agents in their local markets that understand the sensitive process of buying a foreclosed home. They can not only assist with finding properties to shortlist, but can also help you set realistic expectations for setting a budget and asking the right questions when buying a home in foreclosure.
Consult with Clever today and let us connect you to a foreclosure expert in Maryland that can help you on your home buying journey!