More and more people are interested in buying foreclosures and are looking for great deals, do not underestimate the risk involved, such as hidden costs, a risky buying process and often the banks are unresponsive sellers (my way of the highway) with regards to repairs etc.
While there definitely are risks associated with buying a foreclosed home the most risky way to do it is also the lease common method, buying the home at foreclosure auction - I'm going to re-post two articles I wrote a couple of years back in conjunction with a seminar I did about my experiences with buying my first home at the treasurers auction and with lots of tips on how to protect yourself and where to find the information.
The good news for buyers is that most foreclosures are not sold at auction but as REO (short for real estate owned, or bankowned homes). These homes are typically listed by a real estate broker and on the MLS - multi list service. The contract process is a lot like a typical sale giving the buyer the right to an inspection period and appraisal and loan contingencies, which makes all the difference in terms of risks. If you have questions or would just like to discuss just give me a call or shoot me a text or email, Claudia@blueribbondurango.com, 970 749 3555.
Now on to the 4 foreclosure tricks and traps buyers need to know:
1. As Is means As is (mostly)
Banks have little interest and resources to execute repairs and typically sell their bankowned homes on a strict as-is, where-is basis.This means you should expect to take possession in the position it is no matter how defective -- Buyer beware.
2. Bank won't disclose adverse conditions
The bank having never lived in the house has no knowledge of any adverse conditions. As a buyer you definitely want to get your own inspections, roof, pest, sewer, water lines, septic or well, if applicable. This is complicated by the fact that often the utilities are turned off and the bank is not willing to turn them on. It's worth it for the buyer to pay to have them turned on for inspections so you know what you're getting into.
3. The banks use their own contracts and they are quite different form the standard Colorado contracts we use. The deadlines are tighter and there's a lot of disclaimers to sign. Read every word of the contracts before signing and ask an attorney to review if anything doesn't make sense.
4. Expect the unexpected when buying a foreclosure, plan for the worst.
The banks typically work with out of town and even out of state title companies that can be non responsive and disorganized which can be frustrating to the buyer and agent to say the least. I recommend getting your own title insurance commitment at the buyer's expense from a Durango title company, just to be sure.
In summary, when buying a foreclosure you can get a great deal but expect the unexpected - the bank will rush you for the contract, signatures and deposit money but then take lots of time coming up with their necessary signatures on their end of the deal. You can expect the bank to be downright inflexible and often unreasonable. Having realistic expectations going into the deal can keep you from pulling your hair out.