Buying a foreclosure
You hear about them every day....Foreclosures. They are growing in numbers. They dominate neighborhoods. Their prices are dropping more and more. Every buyer asks about them. You would think they are a great buy and a good deal. But here are 11 things you need to know before you even look at one, much less make an offer on one!
- It might not be pretty! I have heard them called SUV's, (stinky, ugly and vacant). Not every one, but most of them need more work than the average buyer is willing to put in.
- You will be buying it AS IS. What you see is what you get, you are buying it AS IS. The bank won't fix ANYTHING, it's AS IS. There is no condition report, it is AS IS. Yes, you can have an inspection, but you get it AS IS. Did I mention, it is AS IS?
- You need an experienced REALTOR® to write the offer. They know what to put in, and what will never fly. Banks are starting to weasel out of some of the normal seller paid closing fees, and if your agent isn't aware of that and doesn't write them in the offer as a seller expense, YOU will be paying them!
- You better get title insurance! And be sure to ask for Gap Insurance coverage. You don't want anyone knocking on the door after you close and find out they have a lien on your new home! As a Buyer's Agent, I have my title company do a short search, just to double check what the seller is telling us is true regarding liens on title, and to be sure the bank actually has acquired title to the property.
- You better have a lot of PATIENCE. Banks work M-F, 9-5. You will not get any answers on the weekend. They don't care about your offer deadline. They will answer when that offer gets to the top of their pile. Or should I say piles! They have thousands of files, and you are just a number! Wait your turn.
- Be prepared to get a counter, usually verbal. They are the same most of the time: "We have multiple offers. We are asking all buyers to give us their highest and best offer."
- Read the fine print! Many times there are terms in the sellers addenda that impose terms that favor the bank and NOT the buyer, ie: $100 daily penalty if YOU don't close on your contract date. Or you must close no later than 30 days after acceptance of the offer.
- Be Patient...REALLY patient! And you will need patience all the way through until closing. The bank many times is the one who can't get to closing on time. You may have to get extensions. Yes, you will be waiting until you get to the top of the pile! And no, they don't pay you $100 per day they are late!
- Read the fine print! Again, this is where an experienced REALTOR® comes in handy. Is the seller able to prove to you in writing that the water bill is paid in full through the closing date? What about taxes, condo fees or other special fees? Better get that in writing! It would be highly advised to get an attorney to represent you at closing.
- Be sure to re-key EVERYTHING after closing. Many asset managers use a master key system. You want to be sure that you are THE only person who has keys to access your new home.
- Realize when looking at foreclosures that they are priced significantly lower than the market value, usually due to the amount of work they need. The assessment, though, is based on the assumption of good condition, so the taxes will be much higher than most homes in the same price range. Don't look at this like a negative, rather a positive. You are getting an eventually higher value home in a lower price range, and probably a much nicer neighborhood than you were looking in.
Use these tips to purchase a foreclosure property and keep your sanity! If you need an expert Buyers Agent, contact Pat Tasker at 262-437-5853 or by email at ptasker@shorewest.com.
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Pat Tasker
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