Thinking of Buying a Foreclosure? Read This First
Buyer Should Always Investigate Everything
The long lasting downturn in housing has led to a rethinking of many of the former assumptions made in the residential real estate market. As recently as ten years ago, it was practically unthinkable for a homeowner to walk away from a mortgage. In recent years, however, a great many people have done exactly that, and the glut of foreclosures has damped down prices severely.
Many foreclosed on properties have a stripped down appearance since their former owners have removed everything of value from the home in a desperate attempt to get some value out of the property they are loosing. This will often mean that foreclosed homes are devoid of any appliances. This may extend as far as missing water heaters and furnaces.
Still, there are many properties in foreclosure that have great potential value which is spurring interest in such sales. Buyers should be prepared to accept the fact that foreclosure sales are deliberately kept as impersonal as possible. The bank that now owns the property will simply view it as an asset to be sold off with the greatest possible return. Response times to bids can be agonizingly slow, and there is little that can be done to speed the process. There is little point of trying to add personal notes to any requests for decisions or even information. The bank regards all correspondence on the case as mere book work.
Properties of this sort are often tagged REO for Real Estate Owned. This refers to a property that a bank or institution has taken possession of after forcing a foreclosure sale.
Sold As Is
The stripped down look of foreclosed homes can mean that faucets and other plumbing features have been removed. Sometimes the former owners have attempted to have a short sale for less than the amount owed, but the lender refused to cooperate. This left the owners angry, and they may well have taken those feelings out on the house. There are homeowners who have purposely damaged their houses to make it more difficult for the bank to market them.
Regardless of the condition the home is in, the buyer of a foreclosed property should not expect the bank to make any repairs. The property is simply sold as is. Careful inspection of the property is therefore warranted. The bargain price offered should be weighed against the fact that there will not likely be any disclosures about problems the house may have. If electrical outlets do not work, or there is a ceiling leak in a room, it will be up to the buyer to find out the problem and then fix it.
Banks have their own set of procedures that they follow in foreclosure sales. They will not use the standard sort of contract that local realtors may employ. Their terms will be set up by bank officers at the firm’s headquarters. In summary, a bargain price on a foreclosed property may mean it is not such a bargain after all, but low prices will overcome a lot of potential hurdles.