The truth is that while some of these homes may be a good bargain in the beginning, they can also come with many inherent risks to the buyer in addition to lengthy closing times, frustration and confusion. I will try to break it down a bit. HUD or (Housing and urban development) foreclosures: Most of these homes are sold "AS IS". Unless you are paying cash, your loan and lender will need to "assess" and insure that the property meets their "Underwriting Guidelines". In addition you will need to be sure that your "Home Owners Insurance" carrier will Insure the home. All offers must be presented using a "HUD approved" broker/agent.
- If all goes well, you could get a good home at a fair price.
- If all does not go well, you loose between $1,450 - $2,575 dollars (non-refundable) fees and costs, not to mention any personal OUT OF POCKET cost such as 1) Time off work, 2) Moving expenses, 3) Extra days in your current home/apartment.
- This is a 30 - 60 day process.
REO or Bank Owned foreclosures:
- Banks work on their own time schedule and no one can speed up the process.
- Each bank and even those within the same "bank/branch" can be different because it depends on the "asset manager" in charge of that particular account.
- Banks will sometimes do repairs or offer "concessions" in lieu of repairs.
- If home is in need of repairs, again the homes current condition will have to meet your lenders "Underwriting" requirements.
Short-sales or "possible" short-sales: Don't let the name fool you. Short-sale in "Banking terms" means that the bank is "CONSIDERING" taking less (a shorter amount), than what the current owner owes on the home. Depending on what stage the "Short-sale" is in; It could take 30 days or it could take 6 months. Things to consider when purchasing a "Short-sale" are:
- Your time frame for moving is a very important factor when pursuing a purchase of one of these.
- If you have a loan that has a "lock date" on the interest rate.
- If the current owner is still in "possession" of the property, Will they move-out at closing or will that become an issue?
- If they do move out, what condition will the property be in at that time?
- If you want or your lender requires repairs, will the current homeowner do those repairs, or will the bank? Will anyone?
This is not considered to be a "CHECK LIST", as there many other issues that can and do arise and should be carefully considered with your Real Estate professional.
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