About a year and a half ago I purchased my first home (pictured throughout this article).  The home was also a foreclosure.  Now a year and a half later I can say that I am almost finished with the rehab work on the house.  Speaking from experience, I plan to provide you with 5 tips for buying a foreclosure in Atlanta.

1.) Hire a Knowledgeable Agent

Any Realtor holding a license in Georgia can write an offer on a foreclosure.  However, working with a Realtor that is a Certified Distressed Property Expert (CDPE) will greatly improve your chances of not only identifying a great deal, writing a good offer, but ultimately get you to the closing table.  It is important to not only hire an agent that is knowledgeable with foreclosures, but one that is also a local expert on the area of interest.  This can make a world of a difference as more often than not news of a foreclosure catches the ear of a local expert before anything becomes official.

2.) Be Able To Buy Without Having to Sell

This is a bit of a segue into the next tip.  Unlike typical sales contracts sellers (the banks) are not willing to accepts offers contingent on the purchaser selling his or her home.  The banks want to get the foreclosed properties off their books as quickly as possible and there is no guarantee on when or if your home will sell…especially in today’s current market.

If you want to buy a foreclosure and your home is currently under contract with a firm closing date be prepared to obtain short term housing as a predictable negotiation and closing on an REO is very unpredictable.

3.)  Submit a “clean” offer

Often times the lender on a foreclosure will have multiple offers on the same property so your offer needs to be clean.  A clean offer is one that is simple and straight forward.  The best clean offers are those that require little or no financing.  Prior to writing the offer on my current house I had lost out on what I thought was a magnificent find to someone that made an all cash offer.  I knew I was entering a multiple offer situation (I was the sixth party) and as such I submitted a very clean offer; full price (plus $101…just to be safe), minimal closing costs, and a quick close.  I got the house.

When buying a foreclosure, make your best offer up front.  This should be the offer that if you get the house you are ecstatic and if you don’t get the house you are comfortable knowing that it wasn’t meant to be.  Take into consideration the cost of repairs and improvements and what the after repaired value might be.

4.) Obtain a Home Warranty Policy

I typically don’t recommend purchasing extended warranties, but a home warranty when buying a foreclosure is something I would highly recommend.  That being said, it is still up to your discretion if a home warranty is a good investment or not.

Here are three reasons I think a home warranty policy is a must:

• Most policies offer a package level that will cover pre-existing issues.  This is crucial as foreclosures are most always bought “as is”
• Foreclosures are often neglected and as such general maintenance is usually not performed increasing your risk for needed repairs.
• Unless you have experience buying foreclosures you will most likely blow through your budget, a home warranty helps guard you against unwanted surprise repairs that can really wreak havoc on a budget.

If the house is only a couple years old, chances are you won’t need a home warranty.  More often than not, you can include the purchase of a one year  home warranty policy into the contract.  The first year is always the toughest, so why not safeguard yourself?

5.)  Whatever You Think You Know You Do Not Know

This can really “make or break” you.  You decided to purchase a foreclosure because you wanted to cash-in on another’s misfortune.  As such, it is very important that you calculate the costs and return on your investment associated with the property.

If you think you can renovate a bathroom for $2,000 plan on the cost to be around $4,000.  Unless you are an expert and have extensive experience with repairs and renovations double your estimations.  Naturally you will estimate the cost of repairs and renovations to be low because of your desire to see value and a large return on your investment.  If you aren’t sure how much something might cost, contact an expert and have them provide you with an estimate.  This way you’ll know what you’re getting yourself into before it is too late and you have no recourse.

Bonus Tip:  Plan for the Unexpected

Always give yourself some wiggle room.  Depending on the size and complexity of the house, always set aside a sum of money for unforeseeable repairs and renovations.  My home warranty tip helps, but it is still a good idea to figure in an amount of money for the unexpected or miscalculations in repair or rehab costs.