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.
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, J. Rockcliff Realtors
DRE License # 01331583
Phone (925) 997-1585 - firstname.lastname@example.org
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.
Best of luck
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
Your Castle Real Estate
Direct - 303-669-1246
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?