Buying foreclosures with conventional/203k loans - Twin Cities

[Jason Neff]

Hi all,

Can anyone speak to their experience buying foreclosures in the Twin Cities with conventional or 203k loans? Or speak to the local environment for foreclosures generally?

I'm looking to purchase an SFH foreclosure with no major repairs in the outer skirts of the Twin Cities. A few lenders have said they can do conventional or 203k loans on foreclosures and close quickly, though I'm curious what the competition is like for buyers like myself and if local banks/sellers are willing to entertain non-cash offers. I want to believe my initial offer could be stronger than a cash offer, though it would depend more on the success of the appraisal.

Because I'm not in a hurry, I could make many offers until something works, but I'd also like to tip the odds in my favor. For example, it would be nice to have a contact at a bank who sells foreclosures. Or any lender/realtor who can help maneuver through this situation.

Thanks!

Jason

[Matthew Porcaro]

Originally posted by @Jason Neff:

Hi all,

Can anyone speak to their experience buying foreclosures in the Twin Cities with conventional or 203k loans? Or speak to the local environment for foreclosures generally?

I'm looking to purchase an SFH foreclosure with no major repairs in the outer skirts of the Twin Cities. A few lenders have said they can do conventional or 203k loans on foreclosures and close quickly, though I'm curious what the competition is like for buyers like myself and if local banks/sellers are willing to entertain non-cash offers. I want to believe my initial offer could be stronger than a cash offer, though it would depend more on the success of the appraisal.

Because I'm not in a hurry, I could make many offers until something works, but I'd also like to tip the odds in my favor. For example, it would be nice to have a contact at a bank who sells foreclosures. Or any lender/realtor who can help maneuver through this situation.

Thanks!

Jason

 A common misconception is that distressed properties only take cash offers, and/or you can't compete with cash offers with a 203k loan. This really is not the case for a few reasons.

1. If you're going after foreclosures, there's a lot of bank owned foreclosure programs (fannie mae, freddie mac) foreclosures that offer a 10-20 day "First Look" program, where only owner occupants can offer on a property. These banks are mandated to entertain any reasonable owner occupant renovation loan offers on distressed properties. This is how I found my first property I bought with a 203k. 

2. You'll often have sellers agents say that they have "10+ cash offers on a property" as a tactic to try to steer you away or intimidate you to bid a higher number, but the reality is if they were good offers, the seller would have taken it already. With owner occupied loans, you have MUCH more favorable terms than a "cash" investor typically has. Usually cash investors are funds or hard money offers, that need the property for much less of a price than you can get away with. Don't let any realtors push you around on your offers. Place the offer anyway, and ask for a signature from the seller to ensure they saw your offer. 

The one's that try to push you around for wanting to use a 203k loan are often the most misinformed or just pure lazy and looking for the lowest hanging fruit and a resistance free transaction. But that shouldn't change your purchasing criteria that works for YOU. 

Hope this helps some, good luck!

Matt