Foreclosure in 12061>Question Details

Michelle A, Home Buyer in Schenectady, NY

Interested in a specific bank foreclosure property - how do bank foreclosures work?

Asked by Michelle A, Schenectady, NY Sun May 25, 2008

My husband and I are homeowners looking to possibly purchase a bank foreclosure but know nothing about how this works. The home has been vacant for around 2 years. We looked around the property and can see major fixes needed but have not contacted the realtor yet, so we don't know what the inside of the house looks like. We know the property is "as is", but want to know how we can find out just how bad it is (i.e. environmental contamination? Septic? etc) without putting a ton of money up front and then determining we don't want to make an offer. If we contact the seller, does the bank need to provide us with any information that can tell us up front about major issues or do we have to get an inspector before even deciding to make an offer? We have no idea what steps to take, but absolutely love the property and want to find out about financing options and how much damage there really is to it.

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The foreclosure process differs from state to state, it might even differ withing the state. I can speak for foreclosure process in Southern California: When owners get behind enough on their house payment to make their lender nervous, lenders have a right to file a NOD (Notice of Default). Once NOD is filed, owner typically has 90 days to bring loan current. If owner fails to do so by day 90, lender then has a right to post a Notice of Sale on the property. Once posted, owner than has minimum of 21 days to pay off loan and penalties in full. If owner fails to do so by day 21, or later date otherwise posted, property goes to sale on the courthouse steps. The bank then ussually acquires the property at trustee's sale. The Bank is now the Owner of the property, and now it becomes Seller. If you don't have a Realtor who can assist you, contact the listing agent if the property is listed for sale. Listing agent might have disclosures, or a copy of previous property inspection if anybody else was interested in the property and already had the inspection done. I strongly suggest professional home inspection if one wasn't done recently - it will be money well spent. Depending on the size of the property, the inspection should not cost more than a few hundred dollars, unless you need certain expert's opinion... As far as septic - the seller - (bank in REO case) should pay for septic to be pumped and certified, and for LGS Industry Standard Report ((natural hazard zone disclosure). In case the property isn't listed, contact a Realtor who you might know, and they will be able to research the property's profile, find out who the owner of record is and assist you with the purchase. You probably already know what the property is worth if you live nearby, but again it might be good for you to contact a Realtor - you don't want to offer more than that property is worth in this declining market. You don't have to have the inspection done before you make an offer on the property. You have 17 days to get your inspection done after your offer is accepted, and if you discover defects on the property that are not acceptable, you than have a right to cancel the contract and get your deposit back. As far as financing options, FHA will only finance property with certain minimum standards. If you're considering purchasing property as an investment property, conventional loan might be the only way to go. In this declining market most lenders will only do conventional loan with 15% down or higher on non-owner occupied property.
Hope this helps. Good Luck!!!
1 vote Thank Flag Link Sun May 25, 2008
Hi I work in the area and would love to help you see the inside of the house - I can get a copy of the inspection report done by the bank HOWEVER I would always recommend having a thorough inspection done by a local inspector so you know exactly what you are dealing with. And I can recommend local mortgage brokers who can help you with financing the property depending on what the inspector finds is wrong with it. Please give me a call and we can talk about it. Phone number is at my website.
Web Reference: http://www.holliboyd.com
0 votes Thank Flag Link Mon May 26, 2008
If you are looking at any 'fixer' property, I would assume you and your husband are capable 'do-it-yourselfers' and therefore already have some good basic understanding of what a given house needs. If not, you need to make friends with a reliable contractor fast! Did you ever see the movie "The Money Pit"? Banks have very limited information about the properties they foreclose on and advise all buyers to have them inspected. Buyer be ware is very much alive in foreclosure properties. Good luck. The link below will take you to a home inspectors web site that I use frequently that is full of useful information.
0 votes Thank Flag Link Mon May 26, 2008
Read a book or two as well. The Complete Guide to Investing in Foreclosures by Steve Berges - you can buy it for $12 bucks. Also find a good realtor to represent you as a buyer agent.

The first thing's first though - if you're thinking of investing in real estate - with this first house across the street or anywhere - make sure you've got a PLAN. Keep It Simple. It's not so much about learning about foreclosures - first, you've got to have the basics - money to finance and manage the project, resources to help you (realtor, handyman/contractor, etc)...
0 votes Thank Flag Link Mon May 26, 2008
First, find a good local Realtor to represent you.....the bank pays their fee - not you. Your Realtor will guide you through the offer process - then guide you through the inspection process. In California, the banks provide only a limited number of disclosures. Make sure hyou have a knowledgable Realtor to help you. Good luck!
Web Reference: http://www.cindihagley.com
0 votes Thank Flag Link Sun May 25, 2008
Cindi Hagley, Real Estate Pro in San Ramon, CA
MVP'08
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