FAQ
What about liens on the property? Am I buying those too?
If you buy the home during the redemption period, all liens will still be on the property so a title search is critical before you close. Do not close without clear title. If you’re taking out a loan to buy the property, your lender will require clear title and title insurance to close and will order those. If you’re paying cash it will be up to you to get the title search done. The buyer traditionally pays for the policy that covers the lender for the amount of the mortgage. The seller traditionally pays for the owners policy. But this is not a traditional type of sale. The foreclosing party may require that you pay for both title policies. If you buy it after it has become a REO, (see “Tips on Buying Foreclosures: Part One”) all other liens and claims are automatically gone, all except IRS liens that is…they supercede everything (of course). If there are any past due property taxes and other assessments, they must be paid in full and brought up to date in order to close. This is often done by the bank or government agency that has the REO. The bottom line….do not close without a title search and title insurance even if you have to pay for it all yourself.
The listing says the property is being sold “as is”, it also says “mold may be present.” Does that mean I’m stuck with buying a home that’s a train wreck?
All foreclosures and some privately owned homes will be listed “as is”. In the case of a privately owned home, it simply means the seller is not willing, or is not in a financial position, to make any repairs you may request. However, they may give you concessions (money back) at close or reduce the price of the home to compensate you for the repairs.
In the case of foreclosures “as is” means they will not make any repairs because repairs hold up closing, and once they accept an offer, they want to close as soon as possible to get it off the books. However, they too may give you concessions at close or reduce the price of the home to compensate for major repairs. If you are coming into the transaction with FHA backed financing, FHA will require certain repairs must be made before close. Some foreclosures will comply and some will not. As a result, not all foreclosures are acceptable for traditional FHA financing. There is however, a special FHA rehab loan that will allow certain repairs to made within 30 days of close. Most foreclosures, especially government properties, will always have a mold warning in every listing and/or addendum, This does not necessarily mean mold is present. (Your inspection will reveal that). But they must put warning language everywhere possible to cover themselves in case mold or other harmful toxins are found in the inspection.
Can I have an inspection before I buy the property? And who pays?
Absolutely! Never buy anything without an inspection! All offers, whether it’s for a privately owned home or a foreclosure should be contingent upon acceptable inspection. (However, in the case of VA foreclosures or Uninsurable HUD homes, the right to cancel due to unacceptable inspection is not allowed.) The process works like this: You make an offer on a home with a Purchase Agreement executed by your Buyers Agent. (See Part Three). The offer contains a clause which states that you have a certain number of days to have the property inspected after the offer is accepted. If the inspection is unacceptable, you have two choices; first, revise your offer to the lender (or homeowner) to deduct for the repairs that must be made. In the case of the homeowner, you may request that they make the repairs for you. The lender or homeowner then has the right to accept your new offer, counter it, or return your earnest money deposit and call off the deal. Your other option is to simply call off the deal yourself and get your earnest money back. (Remember…you do not have this right with VA foreclosures or Uninsurable HUD homes, or if the lenders addendums specifically forbid it). Who pays? You do. Most home inspectors charge by the square foot. A good ballpark figure is around $300. But it varies by region. This covers the structure itself, plumbing, heating, electrical and appliances. However, septic, well, radon, pest, and mold tests will be extra. A mold test will be required if mold is found during the course of the inspection. This is done to determine what type of mold is present. Occasionally an air quality test may be required and sometimes certain areas of the country require tests for issues that are indigenous only to that region.
TOMORROW: TIPS ON BUYING FORECLOSURES: PART THREE- MAKING THE OFFER
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