How to Buy a Foreclosure Property
This information is primarily for non-investors seeking to purchase a foreclosure to get a home at a discount. Buying a foreclosure property is not always as simple as buying a home from another homeowner or a builder. Here is a list of things to look out for when seeking to buy a foreclosure.
1. They are often in such a state of disrepair that a satisfactory appraisal cannot be performed to the banks standards. Sometimes the banks will allow a certain amount of funds to be held in escrow for repairs, but rarely allows the borrower to perform any repairs prior to purchasing.
2. Sometimes it is best to buy a foreclosure from an investor that has the resources to buy a home for cash, then make the repairs. This way the home will appraise and everyone wins; the investor makes money for taking the risk and doing the fix up, and you still get a property below market value.
3. You should always purchase a one-year home warranty and owners/lenders title insurance. This is for your protection as you will have little history on the property.
4. Real estate agents may not want to work with you. This is often because they don't know how to work with foreclosures (and in that case, you don't really want someone who doesn't know the nuances of foreclosures). Another reason is because so many foreclosure transactions do not go to settlement successfully, or not without lots of problems, so many will shy away.
5. Banks will often scrutinize a foreclosed property more than a non-foreclosed property to make sure and protect themselves from having the property foreclosed on a second time. This may cause delays in the settlement process.
When in doubt, a settlement attorney is a good, neutral party to talk to.
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