Falling inventories of available homes have make it increasingly difficult for even well-qualified buyers to find a suitable home to purchase. To offset this problem, some savvy buyers have decided to get creative and widen their search criteria to include distressed homes, instead of going the traditional route of buying a home that is ready for occupancy. If you are a prospective buyer interested in purchasing a distressed home and wondering how to have the best possible buying experience, the following tips can help. 

Build in extra time for the purchase and renovations

While most regular home purchases can move from initial purchase offer to the closing table within a few weeks, buyers should expect distressed home purchases to take longer to close. Buyers who are currently renting may want to discuss extending their current lease for a few months to allow time for closing on a distressed home and having necessary repairs and renovations made. 

Secure financing that works for the purchase of a distressed home

Many home loan options, including most conventional mortgages, cannot be used to purchase a distressed home that will need a considerable amount of work before it can be occupied. Instead, buyers of distressed homes typically use some type of construction loan product or an FHA 203k mortgage to purchase these homes. 

When using a construction loan, buyers are required to secure a loan to cover the cost of purchasing the home, as well as a construction or building loan to cover the cost of renovations. In contrast, an FHA 203k loan covers both costs under the scope of just one loan, offering buyers a more simplified process. Homes purchased with a 203k home loan must have all renovations completed within six months, but housing costs during renovations can be added to the loan, if necessary. 

Choose an experienced professional to keep the purchase on track 

The process of purchasing a bank-owned foreclosure, REO, or short-sale property requires more documentation and time than the purchase of most move-in ready homes. Since strict time frames and detailed instructions will apply to each step of the distressed home purchase, buyers should always choose to work with a real estate professional who has experience in handling distressed property sales. In addition to helping making the purchase process easier, agents who work primarily with distressed properties can also help their buyers with referrals to skilled contractors who can assist with the work of renovating these homes for sale