What are the risks if you buy a "foreclosure" house?

Asked by Fernanda, Santa Clara, CA Thu Jan 21, 2010

This question is about this property: http://www.trulia.com/foreclosure/2009295318--N-Hillview-Dr-…

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Norman Alessandrini’s answer
Norman Aless…, Agent, San Jose, CA
Fri Jan 22, 2010
Hi Feranda,
The first thing I'd like to clear up is the FALSE idea that this property is going to be sold for around $ 84,000 this is just NOT TRUE, that is the amount of one of the loans ( it looks like the second loan). I don't know why Realty Trac always gives this false impression, and I wish trulia would not be linked to them.
With that said, the other realtors covered some of the risks, I would like to add that the main risk in buying reo's is that you will find do to loans that may take a bit longer, is your contingence period may run out before you are ready.
Let me explain, the banks usually have there own contract you have to sign that supersedes your contract, they usually give you only 10 days to do inspections and get your appraisal, and loan approved. Now the inspections are no problem to get done and you have time to look them over, its the appraisal and getting the loan approved that you will run into problems. 1st of all the banks usually have a passive contingence removal which means even if you do not remove the contingences in writing they get automatically removed when your time expires. Now usually you can just ask for an extention, but and this is a big BUT you will have a GREAT DEAL OF DIFFICULTY getting the bank to sign one, the listing agent usually says "oh this is ok don't worry about it", but you have nothing in writing and if the deal should blow up they can keep your deposit.
I don't want to scare you away from purchasing reo's, you just need to make sure you have and agent who understands some of the differences and pit falls of purchasing reo's.
As always feel free to contact me if you have any questions.
DRE# 01397256
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Mihaela Matt…, Agent, San Mateo, CA
Thu Jan 21, 2010
Hello Fernanda,
There is no intrinsic risk when you buy a foreclosed (i.e. bank-owned) property. There are risks associated with any real estate transaction, and the detail in the contract forms, accuracy of inspection results, disclosures data, etc. play a big role in a buyer's decision to go for that property.

The good is that the banks owning foreclosed property have done due diligence on title, are very willing to sell it, and do not feel personally affected by low offers.
The bad is that you have to abide by bank's rules on paperwork submission and some timelines, and there is usually minimal communication between the parties.

It's been my experience that although many foreclosed homes are not in the best shape -- some are definitely not "love at first sight" -- many buyers seek them as first homes, and for the opportunities of a good price with potential to remodel to fit the buyer's taste. Can I help more?

We're ready when you are!
Mihaela Mattes
Century 21 Realty Alliance
1528 South El Camino Real, Suite 110
San Mateo, CA 94402
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email: mihaela.mattes@century21.com
website: http://www.e-realtorone.com

I donate 20% of my professional fees to The LAM Foundation http://www.thelamfoundation.org to help women diagnosed with this cruel disease.
Web Reference:  http://www.e-realtorone.com
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April Tavares, Agent, Campbell, CA
Thu Jan 21, 2010

An important factor to keep in mind with a bank owned home, the condition of the property. The bank has no knowledge as to the condition of the property. They will not be providing you with any transfer disclosures that a owner occupied home would provide. You will never know if that drain in the bathroom has had a history of clogging or if there has been any other issues of note.

The bank, as owner, will rarely provide potential buyers with any condition reports up front. Therefore, you will want to hire a home inspector and a pest inspector to completely inspect the home. You should understand fully the condition of the home you are considering. The home inspector and/or pest inspector may also suggest that you may want to have additional inspections to explore questionable issues that they discovered.

April Tavares, GRI, ASP
Realtor, DRE License #01742179
Web Reference:  http://www.AprilTavares.com
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Jessica Dodge, , Campbell, CA
Thu Jan 21, 2010
Do you mean a home that is "bank owned"? If so, the risk is about the same, if not better than buying a "short sale" or a regular sale. The Seller (the bank) has cleared the title of all liens, which is a plus, because you never know what you're going to run into with the other two scenarios. They can also close in 30 days or so, depending of course on your mortgage lender. Lastly, they normally have their listing agent list it for "fair market value" since they have already taken the "hit" on their books when it was foreclosed. Bottom line, they want it sold and sold quickly.

I hope you find this helpful!

Good luck
Web Reference:  http://www.thedodgeteam.com
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