Before You Purchase a Foreclosure
Whether searching for a budget-priced home or an investment property, many people turn to the “Foreclosures” section of online house hunts or newspaper ads. Sure, the price is a bargain, but there are some drawbacks to purchasing a home that is in foreclosure. Take these tips into consideration before you head to the auction:
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- Most foreclosures have been unoccupied for several months and will surely be affected by that. You will need to be willing to put in some work and some cash to bring it up to code/living conditions.
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- If the house is on the auction block, you will likely need the full purchase amount in cash, as the lender or bank is looking to recoup as much from the defaulted loan as they can. They do not allow time for financing to take place.
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- Some states allow redemption to the homeowner, and HUD defines this as “...a period after [the] home has already been sold at a foreclosure sale when [a homeowner] can still reclaim [their] home.”
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- Because a foreclosed property is sold “as is,” you will not receive any disclosures, meaning, a home inspection is a must! Depending on who owns the property will make a difference in how much time you must complete the inspection.
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- On the other hand, if the property is REO (real estate owned), you will be able to go through the home-buying process in the usual way and have time to secure financing for your purchase.
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- An REO will be sold as-is just like an auctioned house, and all repairs will have to be done by the new owner--there are no repair requests or contingencies granted.
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- For buyers that are new to the foreclosure-purchase game, going through a bank to buy the property is your best bet versus auctions. Once you gain some experience in the process, try your hand at auctions.
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- For any distressed property, make sure you have a title search performed. Buying a foreclosure takes long enough, and you want to make certain you will not run into any roadblocks.
For your foreclosure-hunting convenience, realtor.com® has a search page specifically for foreclosures! Check with your municipality for notices on tax foreclosures, and if you have the funding, pre-foreclosures and short sales are other property bargains. Remember to connect with a Realtor® that is experienced in distressed sales. Their knowledge and expertise can make a drawn-out process go smoothly!
Courtesy of New Castle County DE Realtors Tucker Robbins and Carol Arnott Robbins.
Photo credit: Robinson&CO
