Tips for purchasing a Foreclosed Home

Buying a foreclosed home may be a great bargain if you, as the consumer, have taken the time to properly educate yourself about the advantages and disadvantages of buying a foreclosured home. Many buyers have purchased foreclosed homes only to discover that the home had more challenges or defects than they were aware of prior to purchasing the home. The following are just a few tips to consider:
Know your risk:
When purchasing a foreclosure you will be negotiating with a bank or third party representing the bank. Their goal is to get the highest price for the home in the shortest amount of time, they are not concerned about you. The time allowed for inspections will be reduced, in some cases to as little as three days from the executed date of the contract. Meaning if the contract is executed on a Friday you may find yourself scrambling to find an inspector that will do the inspection on a Saturday or Sunday and on short notice. Also, because the bank never lived in or had any knowledge of the homes' condition you will not be supplied a seller's disclosure notice you will however be asked to sign addendum releasing the bank from any future liability should any arise. Additionally, many times the home is missing critical items that prevent all the utilities from being turned on further increasing your risk of the unknown.
Properties sold as a foreclosure are sold "As Is":
This can be a problem for you when you consider financing. If the home is missing appliances, plumbing fixtures, electrical fixtures or the main service panel or the gas meter (and many times this is the case) you may not be able to obtain FHA or VA financing. Current standards for FHA and VA appraisers require all of these items to be in place and working. This is where using a seasoned, experienced full time Realtor will prove beneficial to you and your future investment. The bank will not refund your monies for inspections, option fees (if any) and in some cases your earnest money if your lenders' underwriter will not move forward with financing. Especially if you are beyond the Third Party Addendum time limit established in the contract. Another very important consideration is the overall value of homes in the neighborhood. If the area has many foreclosed homes for sale or sold at lower prices then the area may be deemed a  neighborhood with declining value and not all underwriters/lenders will provide financing for that type of neighborhood.
Consider all the cost:
It is so easy to focus on the great deal you are receiving on the reduced sale price that many times one can loose site of the additional cost. When considering a foreclosure it is understood that some cosmetic repairs will be needed but what about the larger ticket items? It is important that you determine the after repair value vs. the cost involved to complete the repairs as well as the purchase price so you don't find yourself in a negative equity situation. Again this is where your Realtor will prove to be one of your best assets.
Ask for help:
Find a real estate agent that is experienced in working with buyers and that has worked on foreclosure transactions. You will not save any money on the purchase of the home going it alone and many times in the long run it will cost you more than you expect. Your real estate agent will be paid by the bank, it is the best free service you can ever expect to receive.

To learn more about purchasing foreclosures please feel free to give me a call anytime.

Pamela Efferson
www.SellingHomesInHouston.com
713-822-8555