For those looking to score a deal on a home, foreclosed properties can offer a great opportunity. Lenders are looking to unload the property and will often offer up a deep discount to do so quickly. But the process of buying a foreclosed home can differ a little from traditional home sales. Here are some things to consider before you make an offer on one of these properties.
The “As-Is” Sale
Disgruntled homeowners in foreclosure can feel like they have nothing left to lose. Faced with the prospect of losing their house, homeowners sometimes leave the place stripped of anything valuable or useful, including door knobs, fixtures and wiring. In cases like this, the lender is unlikely to make repairs and will sell the home as-is. While you can get the place at a steep discount, it might only be a bargain if you’ve got some DIY skills. This shouldn’t necessarily discourage you from buying, but you’ll need to figure out if the cost of repairs will offset the discounted offer price.
Not Knowing What You’re Getting Into
With most homes, you’ll likely get some disclosure from the current owners. A helpful homeowner might give you a little advice, like the best place to start a garden, or offer you a heads up on minor repairs, like a bathroom door that sticks. And when it comes to big repairs, such as a shoddy foundation or termite damage, the owners might be legally required to let you know before you buy the place. But a lender has no history with the home, so don’t expect to get a run-down of problems before you move in. A foreclosure might be a good deal, but it can also turn into an unexpected adventure.
Don’t Assume They’ll Take Any Offer
While a foreclosed home can often be a bargain, you shouldn’t expect the lender to accept a lowball offer. Even in a market flooded with foreclosures, a bank might balk at a low offer, preferring to wait until housing prices bounce back rather than take a huge hit on the investment. However, you can use local foreclosures to your advantage. Take a look at recent sale prices for homes sold by lenders — which are often called real-estate owned, or REO sales — to help you price the place.
It Takes More Time
Most mortgages are backed by big banks and financial institutions, which means you will likely run smack into a large, slow-moving bureaucracy when trying to buy a home in foreclosure. With a traditional home sale, you can expect to find out if your offer has been accepted within a day or two. But when buying from a financial institution this process can take weeks. So have patience and don’t freak out if you don’t immediately hear back from the seller.
A Different Kind of Sale
Banks have their own processes and procedures for selling a home in foreclosure, which can make the purchasing process feel a bit foreign for experienced buyers. Banks work with real estate agents to show and sell the home, and often these agents can be dealing with dozens or foreclosures at a time, leaving them little time to tend to you. You shouldn’t expect the same careful attention when dealing with a foreclosure, but that’s the price of getting a good deal. The bank might also have its own contract that protects it should the home turn into a money-pit. To make sure you don’t end up feeling shortchanged, hire a good building inspector and insist on tagging along so that you can find out as much as possible about the home