How To Purchase a Foreclosure Property
One of the most common ways of buying a foreclosed home is through a real estate agent.
There are many factors to consider when buying a foreclosed home compared to a traditional home purchase. Foreclosed properties are an affordable housing option, but there are also more things to watch for with this type of home purchase. Use this guide to better understand the steps involved in buying a foreclosed home and to increase your likelihood of success in finding one that is right for you.
Differences In a Traditional Real Estate Transaction and Purchasing a Foreclosed Property:
Negotiating the purchase price of a foreclosed home may take a little longer than a typical real estate transaction because the process may require multiple levels of approval. First, the bank will have to approve the offer. In some cases, an investor may own the property and will have to provide approval as well.
Pricing for a foreclosed home is typically set at market value in an effort to move the property quickly. You will want to submit a fair and reasonable offer, as most banks will list properties at a fair price.
There are several considerations to keep in mind when purchasing an REO Property:
· Unknown property condition
o Given that the bank has not maintained or had first-hand knowledge of the foreclosed home prior to acquisition, there may be no record of property repairs or maintenance that would assess the true property condition. As a result, the bank is often unable to verify the condition of the property or complete a Seller’s Disclosure.
o Buyers are allowed and encouraged to complete professional home inspections on the property.
· As with a typical real estate transaction, out-of-pocket expenses can occur before and after an offer to purchase a property has been submitted. These out-of-pocket expenses may include lender required documentation such as an appraisal or home inspection and bank-required minimum earnest money. Earnest money is a “good faith” deposit demonstrating the buyer’s interest in the property and may be an indicator of how much money will be deposited as a down payment.
· Prior to closing, a buyer should work with their agent to coordinate the date on which they may take possession of the property. Title issues may be discovered during the closing process and will need to be addressed and resolved, along with completion of all necessary paperwork to support the transaction. An extension of the close date may be requested by the seller if these issues cannot be resolved by the contract close date. Because of this, the buyer should allow adequate time after the scheduled contract close date to schedule movers, furniture deliveries, utilities, etc.