Protect yourself when buying a foreclosed property! Over one million homes were seized by lenders in 2010, according to data recently published by Realty Trac, so chances are you may visit some of these homes in your house hunt.
As the foreclosure documentation scandal grows, buyers who may be interested in purchasing a distressed property may wonder if they could have legal issues after closing. Some important points to consider are getting title insurance and getting a survey. If the buyer obtains a mortgage, their lender will require that they have a survey and title insurance, but if the buyer is paying cash it is not required. Title Insurance and a Survey are items that in Illinois are normally paid for by the seller, but banks may be unwilling to pay for them on foreclosed properties. It is in the buyers interest to pay for these items if they must, because Owners's Title Insurance directly protects the homeowner in a title dispute and a survey will provide the legal description of the property as well as showing any easements on the property and building set backs.
Pay attention if purchasing a condo or property that is in an area that has an association. Under Illinois law, a buyer may be responsible for up to six months worth of unpaid association fees.
Another point to consider is the condition of the property. Many of these homes have been abandoned and have not been lived in for a year or longer. Many do not have functioning kitchens or bathrooms. The condition of the property will affect the type of financing that you will be able to obtain. Many of these homes can only be financed with FHA 203K or other rehab type loans. The houses are sold in "As Is" condition. This means that if the property is broken into and the furnace or copper plumbing is stolen you may still be on the hook for purchasing the property.
As a Real Estate Agent in the Downers Grove area and a Certified Distressed Property Expert (CDPE), I strongly urge my clients to hire a Real Estate Attorney to represent them with their purchase transaction. I also stongly encourage buyers to hire a licensed home inspector to do an inspection of the property.
There are so many great deals out there, don't be afraid, be prepared!
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