| Many first-time buyers overlook bank foreclosures, | | | | first factor to consider. |
| thinking professional investors will get the good | | | | Many states also offer discounts on taxes for |
| property because they have more money for buying. | | | | first-time buyers and/or the purchase of foreclosure |
| In reality, first-time buyers often stand a better | | | | homes. For the first-time buyer who is purchasing a |
| chance of acquiring the property, and getting it for a | | | | bank foreclosure, this could translate to a significant |
| better price. | | | | discount. In Maryland, for example, the first-time |
| Bank foreclosures offer an opportunity for home | | | | buyer is exempt from paying transfer tax, which is |
| ownership that first-time buyers may not find | | | | $250 for every $100,000 of the purchase price. An |
| elsewhere. There are numerous advantages to | | | | investor is not exempt from this tax, and must |
| buying bank foreclosures, as well as for being a | | | | factor it as an expense when calculating profit |
| first-time buyer, if the buyer is willing to use them. | | | | potential. |
| When a first-time buyer looks at a bank foreclosure, | | | | First-time buyers also have more lender options when |
| they are deciding whether the home is what they | | | | purchasing a bank foreclosure. Many government |
| want. The amount they are willing to bid depends on | | | | agencies offer special loan programs for first-time |
| what they can afford and how badly they want the | | | | buyers that are not available to investors. |
| home. When an investor is looking at a bank | | | | Bank foreclosures are not always in perfect condition, |
| foreclosure, they are looking at the potential profit in | | | | so a first-time buyer needs to take the time to visit |
| selling or renting the home. An investor's bid is limited | | | | the property before buying. The amount of time, |
| by the amount of profit that can be made. | | | | effort, and money required to make needed repairs |
| First-time buyers are usually offered a lower interest | | | | should be a factor for any buyer when making a bid. |
| rate on home loans than investors. An investor has | | | | Occasionally, the home will have an escrow account |
| to factor their interest rate into their bid because it | | | | for repairs, and the money in the account will offset |
| has bearing on the profit potential. Consider this | | | | the buyer's out-of-pocket expenses. Fortunately, |
| example: | | | | repairs needed for bank foreclosures are usually |
| A first-time buyer and an investor both get a home | | | | minor, so the home continues to be a bargain for the |
| loan of $100,000. The first-time buyer receives an | | | | first-time buyer, even if there is no escrow account. |
| interest rate of 5.5%, while the investor has a rate | | | | Bank foreclosure property can often be obtained for |
| of 7.5%. If both the first-time buyer and the investor | | | | less than the market value of the property, making it |
| paid off the loan within 90 days, the investor would | | | | easier for a first-time buyer to find a home that is |
| pay $1,874 in interest, while the first-time buyer | | | | within their price range. This is especially true if the |
| would pay $1,373 in interest. | | | | lender limits the amount a first-time buyer can |
| Of course, the loan gets higher as the bid goes up. | | | | borrow. |
| For the investor, the property would need to be sold | | | | Overall, a first-time buyer has a distinct advantage |
| in order to pay off the loan, which may take longer | | | | over other buyers, and bank foreclosures can help |
| than 90 days. For the first-time buyer, the purchase | | | | them utilize those advantages to become first-time |
| is for the long-term, so the pay-off date is not the | | | | homeowners. |