10 Don’ts When Buying Foreclosures

Reblogger Debbie Walsh
Real Estate Agent with Shahar Management

 

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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Tags:
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Ambassador
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Janna Scharf
Keller Williams Realty Coeur d'Alene - Coeur d'Alene, ID
Coeur d'Alene Idaho Real Estate Expert

Wise words!  I showed property all afternoon, and the foreclosures were the least attractive and less value for the dollar than the others!

Nov 24, 2009 11:35 AM #1
Ambassador
1,042,881
Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Very good reblog, these words are so true. People just don't understand the risks.

Nov 24, 2009 11:37 AM #2
Rainmaker
2,174,394
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

Very good points for anyone considering a foreclosure property.  I can't imagine making such a big purchase without an inspection first!

Nov 24, 2009 12:22 PM #3
Rainmaker
632,917
Mary Douglas
United Country Ponderosa Realty, Red Feather Lakes, Colorado - Red Feather Lakes, CO
REALTOR, Red Feather Lakes, Colorado

Thanks for reblogging this Debra - a word to the wise....

I hope you have a great Thanksgiving!

Nov 24, 2009 03:05 PM #4
Rainmaker
292,463
Kathryn Gorham
Green Key Realty - Emerald Isle, NC
Emerald Isle NC Crystal Coast

Debra - thanks for the reblog of John's article - I would have missed this great info w/out it. We're under 3% of our market in foreclosure - but that may change with refinancing of 5 year ARMS next year.

Nov 24, 2009 03:22 PM #5
Rainmaker
898,405
Debbie Walsh
Shahar Management - Middletown, NY
Hudson Valley NY Real Estate 845.283-3036

Thanks for the comments everyone-I thought John wrote a great article and it was worth the re-blog.  I hope you all have a great Thanksgiving!  Hugs to you all!!

 

 

Nov 25, 2009 10:49 AM #6
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Debbie Walsh

Hudson Valley NY Real Estate 845.283-3036
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