10 Don’ts When Buying Foreclosures

Reblogger Esko Kiuru
Services for Real Estate Pros

Very strong checklist from John the Housing Guru for anyone planning on buying a foreclosure here in Las Vegas NV. Take a look.

Original content by John Mulkey

While there are sometimes bargains to be found in the purchase of foreclosures, there are also serious pitfalls. Foreclosures are not for the inexperienced. Use the following to help guide you through the process.

 

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1. Don’t buy a foreclosure in the wrong area. Even if the home is a great deal, if you are planning to live there, you’ll probably regret your decision. Price is never the only factor. And even if you are an investor, if the home isn’t in the area you wanted, it may be better to look for another.

2. Don’t assume that a foreclosure is a great buy. Do your homework. Recruit a Realtor® to guide you.

3. Don’t get caught up in the excitement of a bidding war. Whether at auction or through negotiation, bidding wars frequently result in someone paying too much. Have a pre-determined maximum price and don’t go beyond it. If the bidding remains below your maximum, however, use the tactics in Winning a Bidding War.

4. Don’t buy a home without an inspection. Even if a lender is selling the home “as-is,” your offer to purchase should include an inspection clause with a time limit for your acceptance. With an inspection clause, you’ll be protected and not bound to close if you discover serious problems. Your clause should include an inspection for structure, pests, radon, mold, drainage, and anything else that may be appropriate for the home you’re considering.

5. Don’t buy a property without a title search and without purchasing “owners’ title.” Foreclosures may have problems that failed to be uncovered during the foreclosure process. Protect your investment by purchasing coverage.

6. Don’t expect any type of warranty. You’re buying the home “as is” and will be responsible for making repairs.

7. Don’t expect the bank to make allowances for your personal situation. Banks have been overwhelmed with foreclosures and have neither the time nor the inclination to make exceptions.

8. Don’t try to close a deal without an attorney. While you may be using a Realtor® and “trust” the seller, you need an attorney’s guidance to avoid the potential for certain risks and “super liens” that may survive the foreclosure.

9. Don’t attend a foreclosure auction unless you are totally prepared to buy. That means you must be ready to meet the financing requirements of the auction (usually cash or a letter of credit), that you have full knowledge of the property and the costs of making repairs, and that you are fully ready to purchase. Auctions are attended by professionals (often referred to as vultures”) who both know the true value of the property and the cost of repairs. But they are sometimes attended by cash-rich novices who bid up the price far beyond a home’s reasonable value.

10. Don’t consider a foreclosure until you check out the limitations and requirements in your particular state or area. There are considerable differences between states, and just because you’ve heard of great opportunities in one doesn’t mean the same exists in another.

 

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Ambassador
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MichelleCherie Carr Crowe Just Call...408-252-8900
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

Thanks for the reminders. So many people forget their brains in their hurry to catch that "great bargain".

Nov 23, 2009 04:17 PM #1
Rainer
17,742
Tricia Hanley
Pacificquest Auction Services LLC - Silverdale, WA

Great tips! With all the inventory on the market there is something out there for everyone!

Nov 23, 2009 04:48 PM #2
Rainmaker
656,032
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

All great points to keep in mind -- important to keep perspective.

Nov 23, 2009 06:27 PM #3
Rainer
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Sasha Miletic - Windsor Real Estate
RE/MAX Preferred Realty Ltd. - Windsor, ON

Hi Esko, Good post. Thanks for sharing.

Best - Sash

Nov 23, 2009 08:23 PM #4
Rainmaker
347,278
Pat O'Reilly
RE/MAX..214-289-6176 Irving and all of Dallas Fort Worth - Irving, TX

Thanks for the post Esko. All gfood points when considering a foreclosure!!

Nov 24, 2009 12:08 AM #5
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Esko, all of these are good points, but number two rings particularly true, but unfortunately many buyers seem to think that Banks are willing to give houses away.

Nov 24, 2009 11:33 AM #6
Rainmaker
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Bob & Leilani Souza
Souza Realty 916.408.5500 - Roseville, CA
Greater Sacramento Area Homes, Land & Investments

I just read this OP and it's a wonderful re-blog, Esko! :)

Leilani

Nov 24, 2009 05:14 PM #7
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Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I think #2 should be #1 when there are better investment options (although more frustrating) like short sales! (at the moment!)

Wishing you and your family a Blessed Thanksgiving Day Esko!

Nov 26, 2009 07:55 AM #8
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Michelle,

Great primer for a would-be foreclosure buyer.

Nov 27, 2009 04:44 AM #9
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Tricia,

This list will help to know beforehand what may await on the foreclosure market.  

Nov 27, 2009 04:46 AM #10
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Bob & Carolin,

Do your homework before acting on foreclosures will likely make it a good experience.

Nov 27, 2009 04:49 AM #11
Rainmaker
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Esko Kiuru
Bethesda, MD

Sash,

Thanks for stopping by.

 

Nov 27, 2009 04:49 AM #12
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Pat,

Can't go wrong when you are armed with the knowledge of this list.

Nov 27, 2009 04:50 AM #13
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

George,

Right, it's not as simple and lucrative as it may sound.

Nov 27, 2009 04:52 AM #14
Rainmaker
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Esko Kiuru
Bethesda, MD

Leilani,

John sure knows what he's talking about.

Nov 27, 2009 04:53 AM #15
Rainmaker
325,921
Esko Kiuru
Bethesda, MD

Renee,

Thanks and belated Thanksgiving Day wishes from here, too.

Nov 27, 2009 04:54 AM #16
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