Home Buyer TIPS On Purchasing A Distressed Property: Pre-Foreclosure, Short Sale, Foreclosure or REO

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Real Estate Agent with RE/MAX Suburban 475.135322

 

Home Buyer TIPS On Purchasing A Distressed Property: Pre-Foreclosure, Short Sale, Foreclosure or REO

 

Did You Know That Foreclosures and Short Sales Can Actually Cost A Buyer More?

So many buyers think the best deals out there are foreclosures and short sales, but they can actually cost MORE! 

One important thing for home buyers to keep in mind is that since we are in such a strong buyer’s market now,  there are many motivated sellers out there that have great homes priced to compete with the short sales, pre-foreclosures, foreclosures and REO’s and a buyer can usually purchase one of these homes with a less stress, money and risk factors than when buying a distressed property.

foreclosures comparing costs debra kukulski cary il real estate

Here are just some of the additional costs you may incur with a

bank foreclosure / distressed sale:

 

Survey: Approximately 150.-300. (Usually a seller cost, except when a bank sale)

 

No Tax pro-ration: (usually 105% of the last tax bill in this area, banks only will usually give the buyer 100% of the last known tax bill)

 

Usually no negotiation on repairs, so if you do your inspection and it is not satisfactory to you, you talk with your attorney regarding canceling the contract if it is within the contingency dates, but no one will give you back the 300. or so you may have spend on a home inspection, or any fees that were paid to your lender.  You may also be putting out your hard earned dollars for radon, lead paint, or mold inspections if you feel they are important to you.

 

Not closing on time can also cost you a Per Diem, as banks usually have this in their contract addendums. This is more of a risk now with underwriting and appraisals taking longer and daily changes in the banking industry.  The addendums usually have a charge that the buyer will have to pay for each day after the original closing date if they can not close on time for any reason.  I have seen this Per Diem charge being anywhere from 25-100 dollars per day.

 

By the way....*****I love working with buyers*****  :-)

 

Appliances: Banks usually say there is “no bill of sale on personal property”, so what you see when you write an offer may not be what you see before closing.  Make sure you have some extra money put aside in case you have to purchase appliances.

 

Well/Septic Issues: If a property is on a private well or septic, you will also have to pay for your own inspections and this is usually a seller’s expense in this area.  Another thing to keep in mind is that if you have an FHA loan, a vacant property that has a private septic system will not work since FHA now requires a copy of the septic test and if vacant, the inspector will usually put something on the report like “property is vacant and a re-test is recommended 30 days after normal use”.   If the well test does not come back with the water being safe, the buyer will usually have to correct the situation since it is an “as is” contract.

 

De-Winterization and re-winterizing the property for inspections and final walk-through.  In most cases this is a buyer’s expense.  Even if you are not doing a home inspection, the appraiser usually will want the water on when they come by to do the appraisal, especially if it is an FHA mortgage.

 

No disclosures: Since they have never lived in or in most cases, have never even seen the property, they are exempt from having to do the usual disclosures.   Your due diligence is even more important in foreclosures and any distressed sales.

 

Deferred maintenance: When someone can no longer pay their mortgage, many times they also have not been able to properly keep up with maintaining and updating their home so more repairs are usually necessary than on a home where the seller has been able to afford to keep up with updates and maintenance/repair issues.

 

Timing: Many times there is a very long wait to get a response on an offer, and it is usually worse with short sales than REO’s, which are properties that have already been foreclosed upon. You could be risking closing on time to be able to take advantage of the first time home buyers credit, which expires at the end of June 2010.  Remember, you will have to have an accepted contract by the end of April 2010.  I would recommend not waiting until the end of April to have a home under contract if you are a first time buyer or otherwise principal residence buyer who qualifies for the up to 6500. expanded home buyer tax credit.   If that contract falls through so will your  home buyer’s tax credit of up to 8000 or 6500!

Furthermore, in a short sale situation, in Northern Illinois the trend is becoming that once a seller signs a contract, contingent upon bank approval, the buyer usually needs to move forward with their inspections and mortgage approval right away,  even though the bank has not yet made a decision if they will approve the short sale or not.  Usually once the bank gives an approval, they do not give the buyer too long to close and most of the time it is not enough time to do this after approval.  The other reason for this is that if a seller only sends one offer into the bank (which is usually how it is done because any time a new offer is presented to them they go back to square one and the waiting time starts all over!), the seller really does not want to risk that the buyer cancels the contract after they have waited so long for an answer and the clock is ticking for them when they are facing foreclosure so usually do not want to be tied up with a buyer who will not wait.  In the Short Sales and Foreclosures Resource class I just took last week, the consensus seemed to be that buyers and sellers were waiting an average of 3-4 months for the bank to decide if they approve the short sale or not.

Real estate sale debra kukulski cary il realtor

These are just some things to keep in mind when considering your options. Foreclosures and distressed sales can be excellent opportunities for the right buyer who is not trying to closely watch their costs, who has a lot of time and patience, who has some money to “gamble” with if contracts are not approved, who does not have to close by a certain date (like to get the first time buyer tax credit!) and the ability not to get too attached to or emotional about the property.  Do not get me wrong, there are many great fantastic deals out there to be had right now, but do not make the mistake of thinking that the only good deals are distressed sales. Sometimes, a truly motivated seller with equity in their home can also offer a wonderful buy with less cost, less waiting and less hassles and a property in better condition as well!

 

 

It is a GREAT TIME TO BUY REAL ESTATE in McHenry County, Cook County , Kane and Lake Counties in Northern Illinois.  There are fabulous homes for sale at great prices!

***especially for first time buyers, investors and move up buyers. *** Rates are fantastic, too!

We are having a "HUGE sale" on our large inventory of VERY well priced HOMES!

To Search Homes For Sale, Please Contact Me Directly Or Feel Free To Search On My Website!

My Direct Number at the Office is 847.516.6760

debra kukulski cary il real estate short sales foreclosures waterfront property

 

If I can help you or someone you know purchase or sell a home, I’d love to help.

 

If I can be of assistance to you, or, if you just have a question please do not hesitate to call or email me.  It will be my pleasure!  By the way, if you know of someone that could benefit from my high level of service, please call or email me with their name and daytime phone number and I will make sure to follow up and take great care of them.  My business keeps growing from your referrals.

 

There are fabulous buys on the market....now is a GREAT time to buy real estate in IL, especially for MOVE UP Buyers, Waterfront Buyers, Vacation and Second Home Buyers, Investors and First Time Buyers!

 

 

 

 

 

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To Search Homes For Sale, Please Contact Me Directly Or Feel Free To Search On My Website! 

Search Waterfront and Fox River Front Homes For Sale Here

 

 
 

It is an EXCELLENT TIME TO BUY AND SELL NOW, especially for second home buyers, investors, move-up buyers and even first-time buyers!

 

 

I hope you find this information useful.  I am only a phone call or email away of you need real estate help:-)

Debra Kukulski Real Estate Consultant

If I can be of assistance to you, please do not hesitate to call or email me.  It will be my pleasure!  

By the way, if you know of someone that could benefit from my high level of service, please call or email

me with their name and daytime phone number and I will make sure to follow up and

take great care of them. 

The majority of my business is referral and repeat clients.  I am so grateful it keeps growing from your loyalty and referrals:-)

I appreciate YOU and your referrals!

 

 

I can be reached at my direct number at the office: 847.516.6760.  I look forward to hearing from you!

 

Information deemed accurate and reliable but not guaranteed. Source MRED MLS.Disclaimer: Information herein may come from various sources, some of which may not be reliable and may change without any notice. Debra Kukulski does not guarantee or is any way responsible for the accuracy of the information in this blog and information provided is without warranties of any kind, either express or implied. Information on this blog represents the opinions and ideas of the author; comments by others may not express the views of the author.  All photos and content may not be duplicated without express written consent of author.
Copyright © 2016 By Debra Kukulski, all rights reserved.

 

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Sybil Campbell 01/10/2010 03:38 PM
  2. John Thomas 02/12/2010 12:05 PM
  3. Karen Simms 02/28/2012 04:38 PM
Topic:
Home Buying
Location:
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Tags:
8000 first time buyer tax credit
debra kukulski cary il real estate short sales and foreclosures
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Rainer
55,234
Sherry Siegel, Managing Broker, EcoBroker, ABR
BrokersGroup, serving Sequim and Port Angeles - Sequim, WA

Debra, you have some very valid points, especially regarding wells, septic, and deferred maintenance. The key for listing agents is to disclose, disclose, disclose up front, so there are no unrealistic expectations if the buyers' agent doesn't explain to the clients how short sales work. We do no favors for our Sellers if we fail to disclose.

Jan 09, 2010 04:01 PM #13
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Vicky...thanks for stopping by and that is nice you do not have to deal with winterizing and de-winterizing foreclosed homes in your area.  It is an added expense usually for the buyers although on one foreclosure I am working on now, we were able to get the bank to agree to pay for this, so that was nice!

Jan 09, 2010 11:29 PM #14
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Kay.  That is so interesting that the foreclosures in your area are being pre inspected.  Who does this, the bank or the listing agent?  I have seen it where the sellers will do a home inspection and leave it out for potential buyers but I think it is also prudent for the buyer to do their own home inspection and not just count on one that was provided by the seller.   Have a great day, Kay and thanks:-)

Jan 09, 2010 11:36 PM #15
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Sharon, that is so true that the banks seem to have their own timetable without regard to the buyer.  This is what may make a short sale tough for a buyer who has a deadline to close, for example first time buyers wishing to benefit from the home buyer tax credit.  I took NAR's short sale and foreclosure resource class recently and the speaker did an informal survey of the Realtors there and the consensus seemed to be that the average wait was 3-4 months after submitting an offer.  You just have to have a lot of patience!  I have found that REOs, or foreclosures seem to move much faster than short sales, since the bank has already taken the property back and is more motivated to get it off their books.  Sharon ...have a great day and thanks:-)

Jan 09, 2010 11:41 PM #16
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Mary, I do agree!  Short sales and foreclosures can be a good deal, but they are definitely not for everyone and best if are very patient and not emotionally attached to the property.  Mary...thanks for popping by:-)

Jan 09, 2010 11:50 PM #17
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Perrin, I had not heard that, how interesting! 

I agree, foreclosures can be great deals, but they are definitely not the only great deals in our market.  Many buyers come to me saying they want to buy a foreclosure, but what they really mean is that they want to get a good deal on a home and there are SO many fantastic deals out here now!

Perrin, thanks so much for stopping by my blog and have a excellent week:-)

Jan 12, 2010 04:20 AM #18
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi there, Lynn...how nice to see your smiling face:-)  I know, right?  I love that little dog and just want to keep reminding anyone I can that there is a HUGE REAL ESTATE SALE going on right now!  Lynn...have a great day and keep helping spread the word!

Jan 12, 2010 04:24 AM #19
Rainmaker
284,666
Tere Rottink
CoastalVa Realty Inc - Virginia Beach, VA

Debra.

Good post,

In my area some banks are fixing the property for sale.  They look almost better than the renovated properties and they sell them 10% cheaper than whatever it should sell for.  You can do a home inspecition too.  On short sales you can also do inspections.  So I would agree with this (in my area) for properties bought at the court house steps.  Tere 

Feb 12, 2010 12:02 PM #20
Rainmaker
112,529
Robert Dirienzo
HABITEC Home and Building Inspections, LLC - Franklin, TN
Home Inspections - Nashville TN

Great Points!  Another issue people need to be aware of is the effect of the "as is, where is" auction.  In this case, there is no recourse if you buy the house and find "issues" later.  At HABITEC Home and Building Inspections, LLC, serving Nashville and Middle Tennessee, we offer the "Auction Inspection" to help people make a good decision about the short sale or foreclosed home at auction.  For details, see: http://habitecinspections.com/AuctionInspections.aspx

Thank You,

Richard Acree

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Comments in this blog posting are the copyrighted intellectual property of Richard Acree, President, HABITEC Home and Building Inspections, LLC, and contributing members of the Active Rain Real Estate network, and are intended to educate and otherwise assist home owners, sellers and buyers, building owners, sellers and buyers, realtors, real estate investors, property managers, and lenders in the process of owning, buying or selling homes or commercial buildings.  HABITEC is a residential (home) and commercial building inspection company serving Middle Tennessee including Nashville, Brentwood, Franklin, Murfreesboro, Smyrna, Mt. Juliet, Hendersonville, Dickson, Belle Meade, Columbia, Spring Hill and more!  In addition to building inspections HABITEC offers Environmental Services for mold assessments, radon testing and water quality analysis.  Additional information about HABITEC can be found on our website at http://www.habitecinspections.com, or call 615-376-2753. 

Richard Acree is the author of the HABITEC Home and Building Inspections Blog and founder of the ActiveRain Group Tennessee Home and Building Inspectors.  All are welcome to join and see more blogs like this one. 

 

Mar 04, 2010 12:49 PM #21
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Tere!  I am not really seeing the banks fixing up the homes before they sell the foreclosures here, but that would certainly help move them.  I always strongly encourage my buyers to do a home inspection on any property, foreclosure or not!  I think it is so important for the buyer to know what they are getting into.  They are even more important on "as is" contracts, such as foreclosures, some short sales and REO's.  Tere, I hope you are having a great weekend and thanks for stopping by:-)

Mar 06, 2010 11:44 PM #22
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Richard, thanks for commenting.  You are preaching to the choir!  I do agree that a home buyer should have a professional home inspection done on any home purchase. 

Mar 06, 2010 11:46 PM #23
Rainmaker
111,614
Mike Schneider
10 YRS with Active Rain ! - Lake in the Hills, IL
ABR, CDPE, SFR

Hi Debra...

Recently, I sold a Freddie Mac REO and they actually repaired, replaced all the electric issues, repaired the disposal (new), corrected all the outlets in kitchen) replaced the counter tops., garage door opener..etc. up to $6,000 in cost.

Prior to close all that was done..besides they offered a 3.5% credit...a 2yr warranty...etc.

and, a $1000 bonus to the selling broker.

not bad ! 

have a safe labor day week end.....

Mike Schneider, ABR, CDPE, SFR

RE/MAX SUPERIOR PROPERTIES

www.just-ask-mike.com

 

Sep 03, 2010 05:00 AM #24
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Mike:-)   It seems to be a different case in each situation, depending on who the negotiator is at the bank, but I think it is best for a buyer going into a distressed sale to be prepared for no repairs and credits and "as is". Then we still try our best to negotiate all we can for the buyer.  I think it is important to set reasonable expectations for our buyers, so they are prepared for the worst with distressed sales, but we still try our best to help them get the best deal possible.  Thanks for stopping by!

Sep 09, 2010 02:35 AM #25
Rainer
37,260
Kay Horacefield
UTR-Texas Realtors - Clear Lake City, TX
Houston-Clear Lake City-League City, TX

Buyers definately need to be well schooled in the buying process and the bottom out come. 

I would make a suggestion, remove the music from this post. At least that is my take.

Dec 01, 2010 02:19 AM #26
Rainer
128,172
Erna Neal
The Viking Team, Realty - Winter Park, FL
A Knowledgable Central Florida Realtor

Debra, these are really good points, buyers need to find out upfront what they are getting into. This post really shows what the costs associated with buying a distressed sale can be. 

Jan 02, 2012 04:37 PM #27
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Erna, and thanks so much.  I do agree, I always like to sit down with my buyers before we start looking at homes to go over all of this with them and to see if short sales may work for them or not since there are so many! Most buyers do not understand how different the process is and are not prepared for a potentially very long wait to hear on thier offer from the seller's lender.

Jan 03, 2012 03:09 AM #28
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Kay, that is a great suggestion,  I do not know why they are all playing at the same time but I know it must stop! LOL

And I do definitely agree on buyers going into the home buying process with thier eyes wide open on foreclosures and short sales.  Thanks so much!

Jan 03, 2012 03:19 AM #29
Rainmaker
589,783
Phil Leng
Retired - Kirkland, WA
Phil Leng - Retired

Hi Debra,

I commented to a first time buyer recently.

"You won the lottery! This is NOT a short sale, and NOT a bank owned. It is just a regular seller, with equity, who is making money on the property!"

Phil

Feb 28, 2012 06:24 PM #30
Rainmaker
186,590
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Hi Phil, sometimes the best deals for a home purchase in this real estate market are the ones where there is a motivated seller who has equity in the home, and has kept it maintained well, also!  Foreclosures, REO, Bank Sales and Short Sales are not the only good deals for home buyers these days.

Thanks for stopping by, Phil:-)

Mar 11, 2012 12:12 AM #31
Rainmaker
615,536
Mike Young
203kOnLine.com, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

Interesting post and comments. That is all we work with is distressed properties but with varying amounts of distress of course. There are two loans that come to mind where the work happens after it closes escrow. The FannieMae HomeStyle and the FHA 203k both versions. In any case any 203k consultant can give your client a quick "feasibility analysis" to determine a rough cost to cure what ails the home. They can be completed for the buyer or the seller. The seller to get the maximum sale price on the home and the buyer to ensuring they aren't paying way too much for the property.

Apr 14, 2013 01:43 PM #32
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Rainmaker
186,590

Debra Kukulski, Broker Associate

SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL
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