In some markets, the majority of homes actually selling are foreclosures. The following tips will keep the frustration level down when purchasing your foreclosure but they are also relevant for a traditional home purchase.
1. Work with a buyer’s agent. The listing agent for foreclosures typically has a very high inventory of homes he/she is managing. Sometimes these are smooth transactions. However, often there are glitches and you want a buyer agent who will be more invested in your purchase succeeding.
2. If financing your home, make sure you are familiar with the mortgage process. FHA has strict standards in regarding to property condition –peeling paint, structural damage, etc. Your realtor should be able to educate you regarding conditions in the home that might eliminate it in regards to FHA appraisal approval.
3. Don’t cheap out on home inspections. Often, when buyers are straining their resources to purchase the home they are inclined to skip on the home inspection. Village inspections are not equal to a licensed home inspector. Saving a few hundred now can cost you thousands in the future.
4. Don’t cheap out on hiring your own attorney. Agents can’t give you legal advice. The seller’s attorney won’t look out for your interests. Protect your interests and your pocket book by hiring your own attorney.
5. Foreclosures are not likely to be opportunities for lowball offers. Foreclosures often have multiple offers. The bank may not be willing to negotiate if the offer is ridiculously low---they do have the option to just reject the offer. This is especially true if home is already priced significantly below the market value.
6. Be prepared for possible problems after the offer is accepted. Closing extensions, title issues, appraisal concerns, mortgage qualification issues, municipal issues --- things can get very interesting after you make your offer. (This also points to the need for attorney.)
7. Know that contingencies are likely not to be considered. Standard contingencies like attorney review, mortgage financing and inspections are fine. Concessions for closing costs are routinely considered. Sale of existing real estate, repair requests (unless related to health or safety) ---not so much.
8. Beware of tenant-occupied homes. I have seen listings where the REO company will cede responsibility for tenant eviction to the buyer. This can be a nightmare in some cases.
Foreclosures can be a wonderful opportunity to purchase homes that might otherwise be outside of your price point. Like any other real estate transaction, however, this is a major financial purchase and should be treated as such. That being said, this is a great market for buyers.