Nowadays, buying a foreclosure is pretty tempting. Foreclosed homes are often listed well below market value, and allow buyers the chance to get their hands dirty and make something entirely their own. These homes come with a lot of opportunity, but there are also some challenges associated. Here’s a list of potential problems with buying a foreclosure.
Unlike a regular sale, a foreclosure or REO (real estate owned) property doesn’t come with a knowledgeable seller. This means that you’re going to have to do a little extra work to find anything out about the home. Work with your buyer’s agent to learn as much as you can, and ask them to try and dig up disclosures from past sales. You may also want to research permits and records, and read through the preliminary title report a few times.
2. No credits for repairs
REO’s are sold “as-is” and often come with a laundry list of needed repairs. But in addition to the obvious repairs, you’re not going to get any disclosures from a seller describing extras. Instead, it’s up to you to get a good inspection and use it to make a wise decision. If possible, find out if there’s any way to get a hold of an old inspection report prior to making an offer. This will save you time and give you a head-start in buying.
3. Homes stripped bare
Foreclosures come with a lot of baggage. Oftentimes, homeowners are fed up or upset with the banks for taking the home, and they will do everything they can to hurt the home’s value. Some will remove appliances, fixtures or piping from the house, and others will damage the property on purpose as a means of revenge. Don’t be surprised to see a once-beautiful home with missing parts and a few holes in the walls.
Be sure to account for these damages in your offer. After all, you will be the one responsible for repairs.
4. Banks instead of people
Undoubtedly the biggest downside of buying a foreclosure is working with the bank instead of individual sellers. Every process will take longer than a regular sale, and the whole thing will be highly impersonal. The banks work from a business stance, and have their own contracts, requirements, and timelines. You are waiting on them, and they are all about the numbers. Be prepared for this when you make an offer on a foreclosure.