Buying a Foreclosure

May 7, 2009
Matt Isleib

 

The snow is gone, the ground is wet and the smell of spring is in the air. That means the Spring Real Estate Market is here. If you are in the market to buy a home you will certainly come across homes that have been foreclosed.  In February there were roughly 291,000 filings alone. Here are some things that you need to know when buying or putting an offer on a foreclosed home.

 

·         First of all there are several stages of buying a foreclosure. You can actually go to the auction and bid on the house. You need to be aware that the standard requirement is posted in the paper for the down payment. It is typically 10 percent of the estimated value and the funds need to be certified or a cashiers check.

·         If you are the highest bidder and have your funds ready, you have typically 30 days to close on the purchase. Make sure your mortgage is good to go or you could be at risk

·         Aside from going to the auction, nowadays it is more common for the lender to foreclose and then list it with an agent. He takes your offers to buy and works on behalf of the bank or lender.

·         Buyer beware, foreclosure sales are as-is. So if you are putting an offer on a home that was foreclosed and bank owned make sure you get an inspection before-hand. If not you may be in for more than you bargained for.

·         If you are looking at a foreclosure as an investment think long term. This is not a “quick” flip market. Six months minimum, if you know what you are doing you may be able to make a good profit. But the key is being able to hold the property for a while.

·         Often times there are liens or back taxes that are due on foreclosed homes. Have your attorney do a search to make sure that you are not stuck with the previous owners tax debt.

·         Do your homework with the bank or the real estate agent representing the bank to find out depending on where you live if the home was “winterized” before the utilities were turned off. You may also want to make sure the utilities are in working order before buying. Besides most lenders or banks want the utilities in working order before they lend you money for a mortgage anyway. However if by chance that is not the case you should investigate.