Looking to find a great deal when buying real estate? A foreclosure could be the best way to go – if you can find one!
Metro Atlanta Foreclosure notices were down 56% in January 2014 from the same month a year ago and are now down to the lowest level since 2003, according to the Atlanta Journal Constitution. While scarce…there are still a few around and I’m sure more to come over time
There are a few key things to keep in mind when buying a foreclosure in the Atlanta area as it is much different than buying a property from a typical seller. When purchasing a property from a typical seller, even if listed as “sold as is”, you normally will have some type of protection. In most cases the seller has owned or lived in the property for some time and usually have some knowledge of its history. Even if the homeowner has not filled out a Seller’s Property Disclosure, state law usually indicates that they disclose any significant problems to the buyer. The same laws usually apply with the sale of foreclosures from lenders, however the difference is the lender usually knows absolutely nothing about the property other than what may be contained within the appraisal report form when the first made the loan. They have never occupied the property and in many cases have never even seen the property.
In the case of a typical seller that actually occupied the property, assuming something goes majorly wrong shortly after purchasing, a buyer may have a case to prove that the seller knew or should have known about the problem and did not disclose. Unfortunately with a foreclosure, you will normally have no such recourse against the lender. In fact this is usually clearly spelled out all the additional addenda the buyer is required to sign – which brings me to my next point.
When buying from a lender, the purchase and sale agreement (contract) is often much different from that of a typical arms length transaction. Normally – your buyers’ agent will present the offer on a standard contract. IF the lender decides to accept your offer – they will typically accept it contingent on the provision that you sign the 10+page addendum which in all cases gives the lender the greatest advantage and significantly alters the transaction.
One of the major changes found upon reviewing the lenders addendum is that the time limits originally imposed are completely ignored and replaced with time limits that favor the lender. In fact, many times the lender may impose a per diem (daily) charge should you fail to close by a certain date but not agree to any such charge in the event they fail to close (All my clients love that one!) You may also find that many of the contingencies, such as the due diligence period take on a completely different meaning and may no longer provide a “free look” period, allowing you to back out for no reason at all. The lender will usually reserve the right to sue you for specific performance (forcing you to buy the property), but require you to waive the right to sue them for specific performance should they back out.
Bottom line – sure you can certainly get a great deal with buying a foreclosure. However – it is very important that you work with a buyers agent that truly understands foreclosures and all the additional things that are factored into them and can explain them to you! Don't take it from me though....Check out A Buyers Perspective on Short Sales and Foreclosures.