Buying a foreclosed property can be a great deal, but it can also be confusing and stressful. Here are five things you should know to make the process easier.
Take it or leave it. Foreclosures are sold “as is.” In a normal home sale the sellers are required by law to make all kind of disclosures about issues that the home has had in the past, repairs made to the home, repairs that need to be made to the home, etc. In the foreclosure process the banks make it clear that they don’t live in the home, have never lived in the home, and have no idea about the home’s history, so you won’t be getting disclosures of any kind. The home is yours to take or leave just as it is.
Check out the neighborhood. The neighborhood that the home is in can tell you a lot about the potential value of the home. Are there lots of homes for sale in the neighborhood? Are the homes primarily rental properties or are they owner occupied? Are the homes and yards nicely kept or is the neighborhood falling into disrepair? The answers to all of these questions can give you a good clue about whether or not you will be getting a good deal if you are to purchase the foreclosed property.
Forget contingencies. In a normal sale there are all kinds of contingencies that you can write into your contract without worrying about potentially losing the deal. One of the most common is to make your offer contingent on the sale of your own home, but there are many others as well. In a foreclosure sale no contingencies are the way to go. The less reason you give the bank to reject your offer, the more likely you are to get the home.
Use cash. Or at the very least have all of your financing secured. Pre-approval does not necessarily mean that the financing will come through quickly enough in the foreclosure process. The less hassle you have to go through to get the money, the better it is. Cash is always the best option.
It’s all on you. Depending on the laws in the area of the foreclosure you may have a short window of time to have an inspection done before committing to closing. In this case, everything is riding on you. It is up to you to know what work needs to be done to the home and how much it is going to cost. Again, this goes back to the fact that there are no seller disclosures when dealing with a foreclosure. Hire a trusted inspector (consider having two inspectors look at the property) and follow-up by hiring any necessary specialty inspectors and/or contractors to give you as much information as possible before closing because uncovering potential problems is your responsibility alone when buying a foreclosed property.
Cooper Realty Associates are REO specialists in Sussex County. If you’re thinking of buying a foreclosed property, give us a call and put our expertise to work for you – 302-856-6434.