Foreclosure in San Antonio>Question Details

Maria, Other/Just Looking in San Antonio, TX

how does buying a foreclosure house work?

Asked by Maria, San Antonio, TX Mon Jan 5, 2009

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13
All good answers...First you need to know what your resources are - as has been mentioned you are buying the home, ostensibly, "As-Is". Many foreclosures require a lot of work, they have been winterized and the electric and heat are off, so determining exactly what it is that you are buying is crucial. If you are an experienced contractor this might not be an issue, but if not you should have the home inspected by a reputable, professional home inspector. Because contractors and investors are looking at these homes they may place offers without the inspection as a contingency, so you might have to offer a higher price in order for the bank to consider your offer over theirs with the contingency. You can also include repairs that you'd like the bank to make in your offer, however again, the more contingencies the more likely the bank will go with another offer or reject your offer outright. Sometimes a credit for the repair is offered by the bank, but these homes are priced for their condition so it's not usual for them to offer huge repair concessions. Once the offer has been negotiated and accepted additional addenda may have to be signed (no markups!!) and returned to the listing agent to be returned to the bank. The steps to close from here will depend on the area you are in and what has been agreed to in the purchase offer. Repairs are completed if specified, Inspections take place if specified and any problems discovered are resolved. In my area the seller's attorney sends out formal contracts to the buyers attorney. Buyer signs formal contracts and places down payment. Contracts are returned to seller's attorney (some back and forth between attorneys is typical). Title is ordered, Financing is secured by committment and a firm closing date set.
1 vote Thank Flag Link Mon Jan 5, 2009
Maria --

Buying any home can be a lot of stress, but worth it when you get the home you want, and even better if you get a great deal. Many people think foreclosures are always the best deal - I really don't. Let me explain:
When you buy a foreclosure, it is "AS IS, WHERE IS", meaning, you have no recourse if you find something seriously defective after closing. Most defects could be discovered during inspection, and sometimes the seler will compromise if the repairs are substantial, but many times, they really do not care. They'll sell it to someone sooner or later...
Short sales, or Pre-foreclosures, can be a really good deal. Typically you are buying as is as well, but you are buying the home from an individual, not a bank, so the disclosure laws are in place. Granted, the seller may have no money, but getting out of the contract if you need to is much easier.

In any case, the "Secret" to getting a great deal on a great home is have a GREAT Realtor. I have been helping folks buy and sell homes for over 14 years, and I have over 700 happy homeowners as past clients! I would love for you to become one of my happy past clients too!

Give me a call or email if you have any other questions!
DannyT
210-979-0111
DannyT@kw.com
Web Reference: http://IsellSanAntonio.com
1 vote Thank Flag Link Mon Jan 5, 2009
HI Maria,

You have been given some great responses to your question. I will only add one tiny thing and that is you REALLY do need a Realtor on your side that not only knows how to guide your through the process, but also is strong willed enough to get you the deal you want!

Just last month, I was able to get my clients a foreclosure at a price most did not believe would work... took me 2 months of constant bugging on my behalf to finally get the bank to work with us. Also, I encouraged my investors to take one last look at the property before we closed (even though EVERYONE says all foreclosures are "as-is" and they WONT revamp anything once you're under contract). Sure enough, they found a water leak that could have been costly... we came to the bank w/ our solution and we got them to give us a cash equivalent credit of the repairs needed and got the house at a much better price! It all can be done in Real Estate, you just need someone on your side that refuses to hear a NO and turns it into a YES!

God Bless,
Josh
Web Reference: http://www.eXposedHomes.com
1 vote Thank Flag Link Mon Jan 5, 2009
Maria - You might also find this link below useful in explaining the HUD home process.

Matt
1 vote Thank Flag Link Mon Jan 5, 2009
Maria,

The biggest part of buying a foreclosure is dealing with the bank or HUD. The advice below on getting pre-approved is very critical and I couldn't agree with making that your first step anymore. After that, it all depends on the property and how you want to proceed.

If the home isn't in the foreclosure process, but the sellers are worried they are heading in that direction (late with payments and/or "upside down" on their house - owning more than they can sell it for), they can attempt a short sale. Basically, they ask the lender for approval via an agent and the bank agrees to the idea, but waits to see what the offer is. When a buyer submits an offer, the banks then consider it and approve it or not. Short sales take a lot more time and attention as the bank is trying to get the most out of the transaction as they can. There is often a longer waiting period for responses, so please allow time for that.

If a home has been foreclosed, then there are several paths. The bank can take possession and hold on to the home or they can auction it off. Auctions are a tricky process if you don't know what you're doing and I recommend you don't do them unless you're a savvy investor. If the bank is holding on to the home and trying to sell it, they will take a similar route to the short sale. A lot more time and paperwork. You should do your homework with your agent and know exactly what you're buying. Foreclosures come "as is" and exempt from Seller's Disclosure, so there may be problems that you are buying with the house. Inspections will help alleviate some of the stress. If the loan was a FHA loan, then the home is what's called a "HUD home" as Housing and Urban Development has taken possession (as opposed to a bank). These are similar as well in the fact that the response time is slower and there is more paperwork involved. A good agent can guide you through any of them though, don't let me discourage you. Just be sure your agent is knowledgeable, hard working, and on your side to navigate through all of it.

Good luck and if I can be of any assistance, please feel free to contact me.
1 vote Thank Flag Link Mon Jan 5, 2009
Maria,
There are a few avenues in buying a foreclosure. First and most importantly is getting preaproved for a certain loan amount. There is a site Southwest alliance that posts these homes. I have included the link for HUD homes. There is also a list most agents get from title companies that is another avenue for foreclosures and up and coming foreclosures. Make sure you deal with an agent that is familliar with the process. Please feel free to contact me if you need any further help with this and we can go over this in more depth.
Steve Johnson
Realtor
Prudential Classic Realty
210-325-1833
1 vote Thank Flag Link Mon Jan 5, 2009
You need to be qualified for a loan upon approval have a buyers agent who can work with you locate a home with equity and submit an offer.
Web Reference: http://www.lynn911.com
1 vote Thank Flag Link Mon Jan 5, 2009
I think you mean an REO or bank owned property. There is a misconception about the word FORCLOSURE; it as actually an auction that happens on the court house steps and requires a cashiers check. An REO or bank owned property is a very similar purchase to a regular transaction with a typical 30 to 60 day escrow period. You do give up some of your rights in an REO sale vs. a normal equity sale. 1) you cannot negotiate for home repairs (as-is sale) 2) you have a passive contingency removal (very important) from the passage of time your contingency goes away without you signing any contingency removal form, 3) there is typically a per diem charge if the escrow is delayed becsuse of the buyer side of the transaction (usually $50 to $100 per day). Other than these key items the REO transaction gives you all the protection through escrow including a clear title and title insurance.
Web Reference: http://RobertGraf.com
0 votes Thank Flag Link Sun Apr 26, 2009
the site below may help you...
Web Reference: http://www.agogonow.com
0 votes Thank Flag Link Sun Apr 26, 2009
Cindi Hagley…, Real Estate Pro in San Ramon, CA
MVP'08
Contact
you have to explain what you mean by a foreclosure house. there are houses that are owned by the bank or owned by owners that are facing foreclosure.
0 votes Thank Flag Link Sun Apr 26, 2009
Maria,

Our recommendation is to get preapproved before you begin looking for property. This will accomplish a couple of things. First, it will help you identify your financial limitations and secondly, will allow you to respond quickly when you identify a property you want to make an offer on.

Most banks require a deposit and a letter of pre-approval to accompany an offer. A real estate professional can best advise you and walk you throught the process.

Good luck
0 votes Thank Flag Link Thu Jan 22, 2009
Maria,

I agree with all of these answers. One thing I would add that I always tell my clients (who are not investors) is to have the home inspection done before making an offer. Typically, the home inspection takes place after the offer is made and the contract is then contingent upon the home passing the inspection. However as these professionals have answered, the bank owned homes or foreclosures come "as-is". Many buyers of these foreclosure are first time home buyers in my area so to alleviate the worry of "what happens if I find something later" situation, I refer my clients to a reputable home inspector who will inspect the property for them and give them a full report on the homes condition. The inspection is just for their own knowledge and most likely they will not be able to go back to the bank and tell them to fix anything but at least they will know if the home is structurally sound and habitable. The only negative side of getting the inspection done before making the offer is of course the buyer will be out the $400+ for the inspection if they do not buy the home. In my eyes though, a $400 home inspection is a cheap way to alleviate the hundreds of thousand dollar risk on a home investment. Good luck to you!
0 votes Thank Flag Link Thu Jan 22, 2009
I would highly agree w/ Danny... for some reason the idea that foreclosures are ALWAYS the best deals is not true at all... we've had a few HIGHLY successful purchases through the "plain Jane" standard residential purchase. Also, my bet is usually on the pre-foreclosures that really can provide the BEST deals, however they are much harder to find and procure, but well worth it if you know how.

God bless,
Josh
Web Reference: http://www.eXposedHomes.com
0 votes Thank Flag Link Tue Jan 6, 2009
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