Foreclosures are still widely prevalent in today’s market. They can offer a great opportunity for investors or first time home buyers looking to snag a good deal on a home or rental property. Lenders are looking to get them out of the red tape and are willing to sell them for significantly lower prices than market value. However, the process to buying a foreclosed home can be different than buying one from traditional home sales. Here are some important things you need to take into consideration before putting in an offer on a foreclosed property.
Not Getting A Full Disclosure:
With a traditional home sale the owners are usually required to submit to the buyer a disclosure of the property. This disclosure should normally include any faulty features of the home whether it be with the roof, plumbing, flooring, etc. A helpful homeowner may give you advice on repairs and some history about the property. If there are any major repairs such as a problem with the foundation or termite infestation the owners might legally be required to remedy the problems beforehand or at the very least disclose them to you before you buy the place. With foreclosures it is quite possible you may not get any disclosure of the property at all. A lender has no knowledge of the history of the home and they aren’t required to get a full inspection in order to submit a disclosure to the buyer. So don’t expect a full rundown of the property before you buy it. A foreclosure might be a bargain, but you run the risk of buying a home with unforeseen problems and expenses.
It’s An “As-Is” Sale:
Disgruntled homeowners who are in foreclosure may get the feeling that they have nothing left to lose which in turn affects their attitude. Faced with the fact that they’re losing their home, they sometimes will strip the property of anything of value. This can include hardware, door knobs, fixtures, etc. They also may start neglecting the property and it can become damaged. In cases like this, it’s not likely that a lender will make any repairs and will opt to sell the home “As-Is”. So if you can get a foreclosure at a hefty discount it might be to your advantage if you are good with “Do-It-Yourself” household repairs.
Don’t Assume They’ll Take Any Offer:
Although a foreclosed home can usually be a bargain, don’t expect a lender to accept any lowball offer. Even though a market might be saturated with foreclosures a lender may turn its head to a low offer, opting to wait until market conditions improve and sales prices go up rather than take a heavy loss on the investment. However, you can use foreclosures to your advantage by researching the market. Study sales prices of REO’s (Real Estate Owned), which are homes that are sold by lenders. This will help you better price the place and put you in a formidable buying position.
The Process Takes More Time:
Most mortgages are backed by large banks and financial institutions which means it is highly possible that you will have to wait out the process of channeling through a long chain of command and a slow-moving bureaucracy to buy a foreclosed home. With traditional home sales offers are usually responded to within a couple of days where as with foreclosures you may wait weeks to receive a response. Don’t let this alarm you and just understand you need to be patient.
The process of buying a foreclosure is completely different from a traditional home sale. Banks have their own processes and procedures which might make experienced buyers feel like a fish out of water. Banks work with real estate agents to show and sell their REO’s. Those agents usually have multiple other foreclosed properties they represent which can make them far less available to you. You can’t expect the same kind of attention you’d get if you were buying a regular home, but on the flip side that is the price you get for getting such a good deal. It’s also not uncommon for a bank to have their own contract that protects them should the home turn into a money-pit. To make sure you don’t dive into a bad investment hire a good building inspector and insist on accompanying him so that you can learn as much as you can about the property.
If you or someone you know is interested in buying or selling
a Nashville Home please contact:
The Lipman Group | Sotheby’s International Realty
Office: (615) 463-3333 / Cell: (615) 509-1753