OK...that's the bad news. But there's good news too! In the end you can get a good deal..if you're careful! Do your due dilligence. Then find yourself a good buyers agent in your area who specializes in foreclosures. Ask some of the folks here who I'm sure will be able to recommend a good one if they don't do it themselves.Take their advice! And good luck!
It's the hidden things that may be wrong with the home that usually cause problems. I insist my clients get a private home inspection by a certified inspector with some type of construction experience. Two websites for inspectors are available on the site below.
I would also suggest they carefully review any addendums provided by the bank. These are always written in the banks favor. It may be wise to have them take the paperwork to their own attorney for review prior to signing any paperwork.
As Cathy mentioned, purchasing any home requires Due Diligence on the part of the buyer. This will include (but not limited to) verifying there is a clear Title to the property, utilities and taxes are current, what is required by the City for occupancy. Failure to verify any information before writing an offer could cost them thousands of dollars they didn't plan on spending.
There are two foreclosed homes on my street where buyers spent money hiring contractors and then found major stuctural damage. Neither home is currently occupied.
The two most important support issues involve people that will provide expert information along the way:
Real estate professional- that will provide expert insight into the process as well as serve as an expaditor to the process.
Home Inspector- that will provide the necessary information you require about the condition of the home.
There are risks involved with any "Foreclosure" but these people should be able to minimize this for you.
The "Eckler Team"
Here is a write up I have done about buying a bank owned home:
In brief here are the details:
You must put a minimum of $1,000.00 down (unless it is a HUD home then $500.00 is expectable if the home is priced lower then $50,000) and have a pre-approval letter from a lender (some banks want you to be pre-approved by them, but you do not have to use them, however they will try to cut you a deal to use their services) they will not even look at your offer with out this.
Most of them still follow the guide lines that you have a 7 day (includes week ends) inspection period. So you would come to an agreement on price and then have the inspection period, to decide based on inspections if you still want to purchase the home. However not all follow this guideline, so make sure the inspections do not have to be done prior. The home is sold â€œas isâ€ no repairs will be made by seller. If you decide not to buy the home based on inspections, you will get your earnest money (also know as good faith money) back.
Your offer can NOT be based on the sale of your home. No contingencies are accepted.
It can take 1 day or a month to hear back from the bank on your offer. If you are buying a bank owned home (REO Real Estate Owned) and need to close right away, as you are selling your home or your lease is up, I advise you to be pre-pared to have somewhere else to live in the meantime, as this may not close when you want it to. However the savings may be worth the wait.
How long will it take to close, is one of the questions I get asked the most. So far my experience is they have closed on the date on the contract, however not much before that date. I envision a guy working in a small office with piles and piles of files and is getting to them as fast as he can. Not just one person at the bank makes the finial decision. The bank has to prove to their investors that this is the bet possible price they can get.
There is general feeling out there by many buyers, that this bank should just want to dump this home, I will go in a low ball the price, and they should take it. This is not the case. In most situations they do not take much off the asking price; however they will continue to drop the price till it gets sold.
Title work is usually done by their title company (they make it very hard to work with a local one) However, depending on who they choose, it sometimes makes sense to pay the higher amount for the title policy. I have run into many problems with â€œtheirâ€ title company. So far I have caught the mistakes made by their title company, but this makes me nervous, as I am NOT a title person. Some of things I have run into:
They do not warrantee their work
They do not understand Michigan laws; due to the title company is from another state.
They do not check for liens
They do not pay off the liens (seller is responsible for all liens on property, unless other wise negotiated)