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Coldwell Banker United
Mistake 1. All foreclosed homes are bargains.
Understand that the institution selling the property (lender, government agency, etc.) wants to clear its inventory. The home's condition is not their concern. Be prepared to do your homework -- and rely on a professional real estate specialist (like us!) -- to avoid any land mines.
Mistake 2. Overbidding.
Foreclosed-home buyers must know area home values, condition of nearby properties, neighborhood trends, street noise, airplane traffic, zoning and other issues that affect the property's value. Sometimes bank-owned REO properties are priced below market value to attract multiple bids and drive up the sales price. We'll help you bid right.
Mistake 3. No inspection necessary.
Some buyers of foreclosed homes think a professional home inspection is too expensive -- that's a costly mistake. Lenders and others who sell a property "as is" may not be obligated to repair problems and defects.
Only a licensed home inspector can identify problems from electrical wiring or plumbing to radon or pest infestation to serious structural or system problems. If you don't have inspections conducted on a property prior to making a purchase offer, you'll want to include an inspection contingency in your contract. That contingency allows you to terminate the contract if inspections reveal problems the seller won't fix and you don't want to handle yourself.
Also, be sure to do a final walk-through inspection just before closing/settlement to ensure the condition of the property has not changed for the worse and that any agreed-upon improvements by the seller have been made to specifications.
Mistake 4. No clear title.
Most sellers of foreclosed properties will deliver a General Warranty Deed for the property, which guarantees that the seller holds clear title to the property and has the right to sell it to you. Be sure to add a clear-title contingency to your contract with the seller, just to make sure.
Having a professional title search conducted before closing/settlement is critical to ensure you won't be surprised by hidden ownership claims or liens. (A lien is a legal claim against a home for such things as unpaid property or income taxes, unpaid contractors or loans borrowed against the property. Liens can stay intact until the money is paid, which means you may have to pay off any outstanding liens as the new owner if the institutional seller has not already done so.) Without a clear title, you may not be able to get owner's title insurance to protect you against future unforeseen claims.