Home Buying in Danville>Question Details

shannon.pich…, Home Buyer in San Martin, CA

Is a good idea to buy a foreclosed house? Does it take awhile, what is the process?

Asked by shannon.pichler, San Martin, CA Tue Aug 28, 2012

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12
Shannon,

The primary disadvantage to buying a foreclosure is the lack of knowledge the seller has about the physical traits of the property and any surrounding or nearby potentials issues. In a traditional "equity" sale and even a short sale their is a private seller their who is required by law to share with you their knowledge of the condition of the property and any material facts surrounding the property. For instance, if that seller were to know for a fact that there have been repeated and frequent police calls to the house across the street, that seller is supposed to disclose this to you. As well as any defects or other factual info about the house itself. With a bank owned property the seller (the bank) is also supposed to disclose what they know. But that bank asset manager is probably sitting at a desk in Houston and he/she will claim they know nothing. Which is typically true.

Virtually all of the potential informational disclosures that a seller would normally give you can be discovered on your own as long as you AND your agent are diligent in regards to getting a good home inspection, talking to neighbors, asking for police records, getting HOA documentation and a myriad of other tools that are available for you to learn about the property.

All of these things should be done when buying ANY property. But you would be shocked how many agents won't encourage going the extra mile and how many home inspectors wont scrutinize a home as well as they could because they are afraid they might accidentally kill a deal and they want more business from that agent. The bottom line is this. Work with an agent you trust, a home inspector you trust and get any and all inspections and reports you feel necessary. It's your right to do so.
1 vote Thank Flag Link Tue Aug 28, 2012
That was tremendously helpful information. I will steer clear of foreclosures then. I really appreciate that, thank you;)

Shannon
Flag Wed Jul 9, 2014
Hello Shannon:

I agree with both responses below but you also need to make sure that you have a Realtor representing you who has experience of representing buyers in REO purchases. There are some critical differences to be aware of and perhaps the main one is that of "Passive Contingency Removal". You have to be very aware of the time-scales in the final contract (which will have been effectively re-written by the bank in the form of an Addendum), otherwise you could get stuck with a purchase before you were 100% sure you intended.

Definitely some good buys in REOs though.

Bernard Gibbons

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Bernard Gibbons, J. Rockcliff Realtors
DRE License # 01331583
Phone (925) 997-1585 - bernard@bernardgibbons.com

http://www.BernardGibbons.com
1 vote Thank Flag Link Tue Aug 28, 2012
Foreclosures are usually very similar to a conventional sale. The bank is the seller and each bank is different in their contract/ paperwork requests. Your realtor will walk you through the process. Many homes will be sold in their " as is " Condition. Make sure you order inspections so you know what you are buying.
1 vote Thank Flag Link Tue Aug 28, 2012
Shannon
There are pros and cons in buying a foreclosed home. If it is bank owned, sometimes they will have done fix up work and some times have done nothing. If an investor buys it on the court house steps, many times they will have reports done and work finished before they "flip" it.
The main possible "con" is there are no disclosures from a prior owner so a new buyer is in the "dark" about any previous problems. The pro is you could possibly get it for a good price.
Most importantly, I tell a prospective buyers to talk to the neighbors--they generally know alot.

Sue Smith
1 vote Thank Flag Link Tue Aug 28, 2012
The process is similar to a traditional sale except the seller has no prior knowledge as to the properties condition. Should there be obvious and/or hidden problems this can amount to a great deal of money. Like any gamble - there are winners and losers!
0 votes Thank Flag Link Sat Jan 26, 2013
Buying a foreclosed home can be a fantastic idea. It depends on the house. The process is usually the fastest of all your options and is similar to any other purchase, but has a few challenges of it's own. Foreclosed homes don't have many of the disclosures that a "standard" sale would have. That means you won't know much of the home's history unless it's somehow discovered through the inspection process (This may not be a big deal at all but you'd probably want to know if there was a death in the home or the roof leaks when it rains). Also, usually the time-frame to get inspections and remove any contingencies such as loan and appraisal, are significantly shortened. This means as soon as your offer gets accepted, you'll need to be ready to commit to the purchase 100% within a week or so instead of the default 17 days (typical escrow period is 30 days). Lastly, repairs, termite work, and warranty's may not apply to this purchase, so you'll want to verify any major issues with the property early on either be prepared to deal with it, or decide not to purchase the home.

Best of luck
0 votes Thank Flag Link Thu Aug 30, 2012
Shannon,

The answer is, it all depends on the foreclosed house. There are some good deals out there, though fewer than you would think here in Denver. You need to have your Buyer's Broker do a comparative market analysis to determine the value. Then determine how much work you will need to do to bring it up to your standards. Your offer should be make taking all of these things into consideration. It can be a reasonably short process if the bank is efficient and has all of their documents in order. On the best deals, you may have to compete with other buyers who prceive they are getting a good deal. They will sometimes bid more than the home is worth in a 'highest and best offer' situation that the bank asks for in multiple offer situations. There are times when it turns out that the home for sale next door is a better offer when you look at all of the figures and considerations. Your agent can walk you through the process to help you make an informed decision. Best of success.


Robert McGuire ASR
Broker/Consultant
Your Castle Real Estate
http://about.me/robertmcguire33
Direct - 303-669-1246
0 votes Thank Flag Link Wed Aug 29, 2012
Shannon,

Buying a foreclosed home is virtually the same as a regular home sale except the bank dictates what they will and won't do. Normally this includes not paying for repairs.

Felix
0 votes Thank Flag Link Wed Aug 29, 2012
Buying a foreclosed house is not for every one, especially if you are doing it your self bidding at the trustee's sale for the first time. There is always going to be a risk that the former owner may try to litigate to get his title back.

Buying a short sold property on the other hand doesn't carry with it the same risk I just described but there is really not much discount to speak of lately. Lenders realize the market is recovering so there is no need to give the discount.

The bottom line is there is potential for savings but is it worth all that risk or waiting?
0 votes Thank Flag Link Wed Aug 29, 2012
A foreclosed house is no better than any other house. Actually the best prices today are on short sales.
0 votes Thank Flag Link Wed Aug 29, 2012
Guess it also depends on where you're buying the foreclosed home. Are you buying from the courthouse steps? If so, you should watch this video. Buyer beware!
http://www.youtube.com/watch?v=1CanJbhGdJM
0 votes Thank Flag Link Wed Aug 29, 2012
Here is a post that you may find helpful:

How To Buy An REO – Top 17 Questions Answered
http://www.trulia.com/blog/carl_medford/2009/04/how_to_buy_a…
0 votes Thank Flag Link Wed Aug 29, 2012
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