Buying a foreclosure property is like buying a home that has a seller...except that it's much more complicated and involves a lot more work for you. A foreclosure property is often sold 'as is,' so while you'll get a great deal on the price of the property, you'll likely incur a lot more repair costs than you would when buying a home with a seller. When buying a foreclosed home, upfront cost isn't everything - there are a lot of factors to consider.
Instructions
1. When you buy a foreclosed home, start early. If you have a lease that will be ending, start looking for a foreclosed home at least four months before then. While buying a home from a seller may be fast, buying a foreclosure property from a bank is a long, extended process.
2. Be prepared to spend money when you buy a foreclosure. You will incur lawyer fees, home inspection fees, repair fees, and even fees that the seller would normally pay, like getting a CO or paying realty transfer fees. Banks want to get rid of properties, but they don't want to spend any money doing it, so be ready to pay fees that you wouldn't normally pay as a buyer.
3. If there doesn't seem to be a lot of competition to purchase the foreclosed home, bid low. The bank should be happy to get rid of the home, and in many cases, foreclosures are sold 'as is,' so you will have to pay for all updates and repairs. Banks are unlikely to do take backs (where they reduce the home price based on necessary repairs) so bid low from the beginning.
4. Be patient. Banks have a lot going on, so it may take weeks for the bank's lawyer to respond to your lawyer during the attorney review period. Typically, attorney review takes three days in real estate, but with a foreclosure, it could take weeks or even months, especially when there are a lot of foreclosed properties on the market. Be prepared to wait. Attorney review will likely drag on for quite some time.
5. Be ready to fight for things when you buy foreclosed homes. Banks like to take a lot and give a little or nothing at all. If you have an addendum that benefits you that was written into your contract, the bank is likely to refuse to sign it. Be ready to fight for it, and the bank may give in.
6. Get a great real estate lawyer. The contract that the bank will want you to sign may be filled with misinformation and clauses that benefit the bank, not you. There may also be a lot of mistakes in the real estate contract. Make sure your lawyer reviews the contract very well and asks for changes to the clauses that work against you.
7. Make smart decisions. A bank contract may state that the bank can keep any deposit that you've made if you back away from the home. If there is any doubt that you'll walk away from the home, don't risk your deposit, if it is a large one. Do your home inspection, CO and other necessary checks before signing anything. You'll spend some money on that, but it's less than what some banks want as a deposit, since the deposit amount can be thousands of dollars.
8. Get a thorough home inspection. You will be responsible for all repairs, so you need to know what all of the problems with the property are. Things like termite problems, which the seller would normally pay for, will be paid out of your own pocket, so make sure to get everything inspected properly. Otherwise, you could find out that your inexpensive house is very expensive due to needed repairs, like repairs from termite infestation.
9. Make a list of all of the home's repairs and when you'll need to have them completed by for safety reasons. If the cost of the repairs is too high, it may be worth walking away from the home and choosing a more expensive property that is better shape. However, if you can afford the repairs, it's a great idea to buy the foreclosure property because you won't be paying interest on the repair costs if you pay them up front, and you'll have the ability to update the home in a way that you like.
10. Bargain for what you want. You may not be able to get the price down of a home, but you may be able to bargain for a later closing date, if necessary. The bank wants to get rid of this home, so you should fight for what you want with this home.
Tags: foreclosed home, foreclosure property, away from, away from home, buying home
