When you think of buying a foreclosed home in Orlando, you might only consider the potential cost savings. It’s true that foreclosed homes are usually priced below their current market value, which means you can afford more home for the same budget or spend less on a home than you were planning to.
But the cost savings on foreclosed homes is just a small part of the total picture. This is a unique transaction with special considerations and isn’t like buying a regular home. And if you’re hoping to capitalize on lower prices for investment purposes, it’s essential to understand the full weight of your purchase so you can maximize your ROI.
Here’s what you need to know about buying a foreclosed home in Orlando for a desirable outcome.
What is a Foreclosure?
By definition, the term ‘foreclosed’ means that the owner of a property is no longer making payments on the mortgage and the lender has assumed ownership.
In Orlando, foreclosed homes fall under two categories: bank-owned and real estate-owned (REO). The two are basically the same in that the lender is the owner (which is usually a bank). However, the most notable difference is the stage of foreclosure the home is in.
In a bank-owned property foreclosure, the homeowner has ceased making payments. The bank now owns the home and is trying to evict the homeowner so they can sell it to recoup the money they’re owed. Bank-owned properties will typically go to auction, but there is never a guarantee that the home will be sold this way.
Real estate-owned foreclosures are properties that have been to auction but were not sold. At this point, the lender or bank will try to sell these homes on the real estate market, usually via an REO agent.
Five Steps for Buying a Foreclosed Property in Orlando
Finding a foreclosed property in Orlando can be as simple as doing an online search. But buying a bank-owned property isn’t fast and easy. Here’s a simplified look at the foreclosure purchase process in five steps:
Gain a Pre-Approval for a Mortgage
Before you look for a foreclosed property (or any property) in Orlando, it’s important to know that you can get a mortgage when you need one. Getting a mortgage pre-approval is proof you’re a serious buyer with money, which is something that banks will look at favorably. It also lets you know how much you can spend on your investment so you won’t look at properties out of your price range.
Work with a Local Real Estate Agent to Find Foreclosures
It’s difficult to go it alone when buying a home, but this is especially true for foreclosed properties. Real estate agents experienced in foreclosure transactions are your most valuable resource. They’ve been through the process before and can help you set realistic expectations, know what banks are most likely looking for, help you make a presentable offer, and navigate fine details like home inspections and the closing process.
Have the Home Professionally Inspected
Once you make an offer on a foreclosed home, and it gets accepted, the next steps are critical. Banks want to sell foreclosed homes as quickly and for as little expense as possible, which means they are usually sold as-in. These homes will sit vacant on the market for weeks or months before going under contract, and banks are not known for maintaining them in the meantime.
In Orlando, you are not required to get a home inspection, but investors will find that doing so it worth every penny. A home inspection will cost you around $400 or more, but it’s your best chance at uncovering potential issues that could eat into your profits.
However, keep in mind that the inspection will not find everything that’s wrong with a home. The inspector has a checklist that looks for specific features and functions. This is a jumping off point for investors to know if they’re buying a home with “good bones” or will end up spending more than they want to fix it up.
Also, many areas in Florida have an elevated radon risk, including homes in Orlando and Orange County at large. Part of the problem is that Florida homes are built to withstand any weather, which can also act as radon traps. Radon testing may be a sound investment so you can determine whether it will affect your ability to resell the home.
Termite inspections and sewer and water line assessments may also be wise for investors. The more you can learn about a home upfront, the better prepared you can be to make a profit on your investment.
Resolve Lien Issues on the Home
Homes that have been foreclosed on may have more than one lien against it. This is a common issue, as homeowners that can’t keep up with payments may take out a loan to cover other loans.
Work with your real estate agent to find a title company that can you straighten out any lien issues that could prevent you from closing on the home.
Prepare a Renovation Strategy
Once you take possession of the home, be prepared to make extensive repairs and updates. Most foreclosed homes are ignored for weeks or months, and you’ll want to hit the ground running as soon as you receive the keys.
Make a renovation strategy before you close so you know where to focus your efforts when you take ownership. The sooner you can start on your flip, the sooner it will be ready for resale.
How Clever Can Simplify Buying a Foreclosed Home
Maybe you’ve already got your eye on a foreclosed home in Orlando. Or maybe you’re still exploring the Orlando market to find the best investment opportunities. Wherever you are in the search, Clever can help simplify the delicate process of buying foreclosures.
Clever Partner Agents are experienced real estate agents from top companies in their local markets that can help you navigate the complexities of buying foreclosed properties. They can not only help you find potential investment properties, but can also help you set realistic goals when setting a budget and ask the right questions when buying a home in foreclosure.
Consult with Clever today and let us introduce you to a foreclosure expert in Orlando who can help you turn your investment into a profit!