Many home buyers are attracted to foreclosed properties because they can offer great opportunity. But don’t get too excited yet, though foreclosed homes really offer great deals, they also come with challenges. Knowing what you will deal when you decide to buy a foreclosure can prepare you in the process.
There are no disclosures
With a traditional sale, you’ll get disclosures from the sellers. With foreclosures, there’s none. It’s like not knowing what you’re getting into because you will not have any knowledge if the house will need some serious fixing. The bank will not give you the history of the home nor the problems you might encounter when you move in so you have to be prepared.
You can work with your agent on this. Search as much as possible about the home and the neighborhood, your agent may able to find past disclosures. Foreclosed homes are priced lower than similar fair market properties but it is no longer a good deal if the cost of repairs is higher than the discounted price of the property.
Property As-Is
Disgruntled people who lost their home from the bank often strip the property bare or damage it, and normally, you as buyer will be responsible for any fixes. But don’t get discouraged, you are allowed to have an inspection so get the best inspection you can have. Hire the best inspector and tag along so you can find out as much as possible about the home.
Though some banks will make repairs, most don’t. The only way to find out is to formally ask the bank to make repairs after an inspection. The rule of thumb is not to count on any repairs being made.
Lowball offer?
While forecloses home can be purchased fairly easily, don’t expect the bank to accept a lowball offer. Do your research and see the recent sale prices for REO homes to help you place the price. Even banks wait until housing prices bounce back.
The difference
Unlike in a traditional sale where you receive a careful attention from the seller, with foreclosures, it is mostly impersonal. You’re dealing with the bank so be prepared to wait for a few days for a response. Expect that bank will also have its own processes. It doesn’t follow the standard procedure used in the local real estate community. It may also have its own contract that protects its interest and they have companies they like to use on their transactions.
Foreclosed properties often offer a great deal but it could also be a money pit if you are not extra careful. Working with the best real estate agent can help you get through the process.
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