Our local market in Grand Rapids, Michigan has witnessed an unprecedented increase in homes going into foreclosure.  This is not unlike many areas of the country. 

If you're considering a purchase of a  home that is in pre-foreclosure or in the redemption period during of a foreclosure it is important that you are aware of some important situations which will impact the process and /or your ability to successfully execute a transaction.  This list is not all inclusive.  Please be advised that consulting with a real estate professional with experience in this area is highly recommended.

 Do not expect things to be Normal.  According to the wonderful writer Erma Bombeck, "normal is a setting on a dryer".  That being said, there are a number of  aspects of the process which you are fairly likely to encounter, so being prepared or aware of them is important. Here are some "must know tools" for success! 

1.  Remember that "time is of the essence".  In a redemption period of 6 months, the option expires at 6 months...period!  It is rarely extended.  Investigate how much time you have for the redemption the period of the home you are planning on purchasing.  Your agent can check this information with the Registrar of Deeds office to see when the deed was sold at auction.  Make sure that if your offer is accepted, there will be enough time to actually close on the transaction before you spend money on things like inspections and appraisals.

2.  Now, be prepared to be patient.  Do not be surprised if the bank seems to take forever to come to a conclusive decision regarding your offer.  They may be utilizing the services of a "committee" which meets somewhat infrequently to decide the merits of offers that come in on houses they now own by default.  When they do make a decision however, they will usually expect YOU TO HURRY.  Be prepared to be given a very short time to complete the transaction soo....

3.  Have Your Ducks in a Row!  Make sure you have a Valid Pre-approval letter.  You may be asked to submit to a another pre-approval through the bank's approved lender.  Normally this will simply be used to verify that you are indeed qualified to proceed with the purchase.  Have your inspector, lawyer, accountant, surveyor and whoever else you think you need ready to go as well.  There's nothing more frustrating than having 10 days to complete a transaction and being unable to get an inspector you like and/or trust to complete a home inspection.

4.  Inspect the House!  Thoroughly!  Do not expect to get a seller's disclosure that has any information if the home has already been foreclosed on.  If the home is in the pre-foreclosure stage or redemption period, you are more likely to have access to a Seller's Disclosure.  However, do your own due diligence.  I can't say it enough....Inspect the House thoroughly.  You cannot be assured that there will be significant assistance with repairs, so it is important to know what you are dealing with BEFORE you make a final decision on an offer.

5.  You may have to Sign Some Strange Forms.  If you've bought a home before, you are probably familiar with the West Michigan Regional Purchase Agreement.  In addition to the purchase agreement, many banks will also require you to sign an ADDENDUM.  This may be 1 page or 13!  These addendums are written to heavily favor the interests of the bank.  If you are buying a bank foreclosure, keep this in mind.  Be advised that sometimes they will refuse to accept any offer that attempts a modification of the requirements on the bank ADDENDUM which usually included wording that supersedes the purchase agreement.

6.  Be prepared to Become a Nag.  Information may not flow to you freely.  Keep in contact with all parties which will allow you to talk to them.  Do NOT Be Rude!  This will only impede your progress.  Instead be persistent.  While you are waiting to hear answers about the acceptance of your offer, check in through your Realtor often.  After your offer is accepted, make sure everyone is aware of how you are expediting the process.

7.  Know About Stipulations that May Cause the Loss of Your Earnest Deposit!  This can be a laundry list of items or something as simple as closing after the agreed upon date.  Read the contract carefully & make sure your lender reads the contract so they are aware of potential costs to you with regards to closing delays.  You may be required to submit your Good Faith Deposit in Certified Funds.

8.  Do NOT Surprise your Home Insurance Company or Home Warranty Company!  Make sure they are aware BEFOREthey issue a policy that you are purchasing a home which has been in foreclosure.  This is usually not an issue under normal circumstances if the home is in the pre-foreclosure stage or redemption stage and has not been abandoned.

9.  You may have some Unexpected Guests show up before the Closing!  Sometimes, you find that you have more than 1 owner.  Make sure that all lien holders agree to the sale of the home you desire to purchase. Inspecting the Title-work well before the closing is very important to make sure that you are able to obtain clear title.  You may also want to consider buying a "souped up" policy which will give you additional protection.  Consult a reputable title company for recommendations.  In addition be advised that sometimes the loan has been sold to a 3rd party Investor, who will also need to be consulted to ensure the sale proceeds.

10.  This is Probably NOT going to be a Happy, Smiley Closing.  These types of situations are tough and can sometimes get very emotional.  Prepare yourself.  Be calm.  This is not  usually a good scenario to have Buyers & Sellers at the same Closing Table. Do not be surprised if there are some last minute high jinx from the bank making all sorts of changes at the last minute.  Take your time in inspecting them before proceeding. 

11. Keep Things in Perspective!  When you take possession of your home, remember that some really difficult times have probably been witnessed within this home.  If you're a spiritual person...PRAY.  Pray for wholeness and blessing for yourself and your family.  Pray for Recovery for the family or individual who experienced the pain of this type of loss.  Pray that this home is cleansed of it's sadness and once again becomes a place of joy and good memories.

© 2007 Audu Real Estate All rights reserved