When you should not by a foreclosure
I receive many leads for buyers that are only looking to purchase a foreclosure.Â My first question in response is always, "why?"Â The answer is always that they want a good deal. Foreclosures are often NOT a good deal.Â As mentioned on the news lately, banks, government and corporate owners never occupy the property.Â They cannot provide adequate disclosure of the dwelling.Â Your next response may be, "well, I'll have an inspection." This is always necessary and recommended; however, inspectors are human and make mistakes and miss problems (read their contract and you will see that they are exempt from human error).
The local news reported lately that Fannie Mae and others have made repairs to properties which have uncovered other repairs that were necessary, but they overlooked such problems as mold, mildew, structural defects, etc. just to put the property in market show condition so that YOU will buy. I have listed Fannie Mae properties for years, so I understand how they operate.Â It is up to the listing agent to know about the property and recommend repairs.Â But, SOME/ not all agents are trying to lessen the amount of days on the market to show that they can move the property quickly in order to get more the next month.Â The agent may overlook or not really provide enough attention to the property to tell Fannie Mae what needs to happen.Â Fannie Mae has no idea what is going on in the field as they have trusted the asset to the agent (this is the case with most foreclsoures). Fannie Mae has SAMS vendors with whom they have contracted to provide repairs.Â Only SAMS vendors can perform work on a Fannie Mae listing except in rare exceptions.Â These SAMS vendors show up to the property and perform only the work they have contracted to complete.
If the contractor is thorough, they will provide the agent with a new bid to complete the repair properly.Â The agent must then submit the new bid to Fannie Mae for approval.Â If this doesn't happen, then you get a job half completed and improper.Â Good luck to your inspector finding mold under newly installed carpet or behind a fresh coat of paint that was just applied a week ago. Some agents honestly never know what problems lurk in the house, so it isn't always the agent's fault either.Â It is just simply hard for an agent to know everything since they haven't lived in the property either. Do you know everything about your house at every moment either?
I recommend that you have a thermal imaging inspection to show moisture or other items that an inspector cannot detect with his naked eye.Â It is worth a few extra bucks to provide a little more insurance toward your investment.
So, when should you not buy a foreclosure?
1.Â Do not buy a foreclosure without a thermal imaging and traditional inspection.Â
2. Do not buy a foreclosure without a cash reserve for unforeseen repairs.
3. Do not buy a foreclosure without an agent that is experienced in representing buyers in purchasing a foreclosure or it may be a painful process.
4. DoÂ not buy a foreclosure without comparing the condition and list price to traditional resales in the area-you would be surprised at how many foreclosures are priced too high.
5. You should not buy a foreclosure if you are a first-time home buyer and the property needs a lot of repairs and/or updating. I suggest a low maintenance home for first-time home buyers with limited cash reserves.
For a smooth transaction and more information on purchasing a foreclosure, call me so I can help you avoid foreclosure mistakes!
One last thought...resales are competing with foreclosures in the market place right now.Â Don't limit yourself to only looking at foreclosures. Many traditional sellers are ready to move their property and they are often maintained well and they will offer full disclosure.