Things Buyer Should Know When
Purchasing a Foreclosed Property
at
Auction
EXECUTIVE SUMMARY:
Pay the entire purchase amount in cash,
vs. getting a loan:
In most parts, purchasing a property at auction will
be different than regular (non-auctioned,
non-foreclosed) sales. One of the major differences
is that at auction, the winner must
pay the entire amount
with cash, money order, cashier check immediately
after winning the bid at auction. Where as,
in regular sale, if they are qualified, they can
leverage and get majority of the purchase price
(e.g., 90%, 95%, 96.5%, etc) loan with a today’s low
interest of 3.5%-4.5%.
This is a major cost to the cash purchasers at
auction. Loss of leveraging and loss other
investment opportunities should be accounted for.
This value varies greatly from a purchaser to
another purchaser.
The question is that, in view of the purchaser, how
much his entire purchase money worth more compare to
low down payment and getting the loan.
For Foreclosed REO buying Process from Banks please visit
http://www.TexasFiveStarRealty.com/Foreclosure_Things_You_Should_Know.asp
For the
most up-to-date list of REOs foreclosure in North
Texas please visit
http://www.texasfivestarrealty.com/List_of_Foreclosures.asp
DETAILS OF THE DIFFERENCES WHEN PURCHASING A
PROPERTY AT AUCTION AND PURCHASING A REGULAR (NON-AUCTIONED)
PROPERTY:
Disclaimer:
Not
all points specified here should negatively impact
your decision to purchase a property at auction nor
applicable for all banks. Each auction foreclosure sale is
different and requires a lot of details to be
handled when buying a property at auction. Consult with
your real estate agent and/or your real estate
attorney for questions regarding purchasing a
property at auction.
As we stated earlier, the
real question is that, in view of the purchaser, how
much his entire purchase money worth more compare to
low down payment and getting the loan. The answer is
different for each case and each type of purchaser,
e.g., individual looking to live in the property or
investor that wants to flip and profit.
Example:
If the purchaser of a
home is an individual "home owner to be": he intends
to live in his property a his primary resident, hi
is locking his entire purchase money for a long time
before he sells his property.
If the purchaser of a home is an "investor":
typically he fixes/repairs (flipping) and put the
property for sale in the market and after few months
he sells and get his money plus some profit back.
Also, investors cannot get loan, even if they are
qualified and have the greatest FICO score, because
of number of limits that an entity could have open
loans at the same time. This makes it less even less
disadvantage for investors compare to an individual
purchasing a property at auction to live in it.
E.g., some they may put value of about 3% of the
purchase price for this difference.
If the purchaser of a home is "owner to be",
he/(she) should account for much more loss than an
investor for locking all purchase money for a long
time (e.g. 30 years or when he sells his property)
vs. a few months for investors.

CONCLUSIONS:
I came up with some numbers as follow, but I need
your inputs based on your thoughts and experiences
to verify mine.
For an individual "home
owner to be",
paying the entire purchase amount in cash, I put 10%
of the purchase price.
For an Investors
"Flipping Over",
paying the entire purchase amount in cash, I put 3%
of the purchase price.
QUESTION:
I need your Answer:
Based on your experiences and expertise, how much
do you put as negative for paying the entire
purchase price in cash vs. getting a loan (assuming
qualified and rate of 4%) for individuals
"home owner to be" and
for investors?
For more
information on Foreclosure Process and purchasing
foreclosed (REO) property, please visit
http://www.TexasFiveStarRealty.com/Foreclosure_Process.asp
For a
current list of foreclosed (REO) properties in North
Texas, please visit
http://www.TexasFiveStarRealty.com/List_of_Foreclosures.asp
|