7 Tips for Buying a Foreclosure

Hi everybody, Its Hayley Tomazic with J.F. Meyer Realty, and I am coming here today to bring you some information on foreclosures. Because so much of the market today is foreclosures, I find myself helping a lot of buyer purchasing them. I come up with many similar situations and questions, so today I wanted to bring you my top 7 tips for buying a foreclosure.

Tip #1: It Can Take Time

Typically when you are dealing with a bank, you can expect to wait up to 10 days before getting a response from them. And since this response time is so long, there is the chance that multiple offers can come in while you are waiting for a response.  Which brings me to Tip #2.

Tip #2: Dealing with Multiple Offers

How it works when a bank receives more than one offer on a property is typically like this. They will come back and let each agent know that they have received multiple offers on the property, and they will ask for the buyer’s highest and best offer. At that time, you would redo your contract putting in the terms that would be the absolute highest you would go. The agent sends back to the bank, and the bank decides from there.  They will not always decide based upon the price. They make look at if it is a cash offer or the closing time frame. So there are a lot of factors to consider when putting in your highest and best offer on a foreclosure.

Tip #3: Make Sure to Do Your Inspections

This is a big one. When purchasing a foreclosure, you are purchasing the property from the bank, As-Is. If there is anything wrong with the property, the bank will not fix it prior to closing. So you want to make sure before you purchase that property and close on it, that anything that is wrong with the home, you know exactly what it is. Because the bank has never lived in the home, they will not verify any issues the property may have. This could include structural issues, leaky basements or furnace problems. So for you to get the inspection, its well worth it upfront so that you are aware of any the problems the property may have and you have the funds to repair it.

Tip #4: Inspections Can Be Somewhat Difficult

This really can depend on the bank you are dealing with and what their policies are. A lot of times when you are looking at a foreclosure, they have the utilities off. Sometimes just the electric will be on or the home will be winterized. In order for you to do a proper inspection, those utilities need to be on. Certain banks will get those utilities turned on for you, others will require you to get the utilities in your name. Some banks will require you to pay for the de-winterization of the property, in order to get the water back on. These are just things to take into consideration, there may be some added work and costs to make sure the utilities are on.

Tip #5: Bank Contracts Supersede State Contracts

When you send in an offer to a bank, and you write it up on a state contract with your realtor, the bank will go ahead and determine which offer they are going to choose based upon those contracts. Typically, the larger banks are going to have their own forms that they want you to sign as well. They put the contracts into their terms, forms that are approved by them. These forms supersede the state contracts. It is important that you read these documents and agree to all of their terms.

Tip #6: Closing

When you purchase a foreclosure, where do you close? Most likely, when purchasing a bank owned home, you will close at the seller’s title company. Most banks have an approved title company that works with them in dealing with their foreclosure properties and specializes in that type of sale. They will request that you close there. Very rarely do I see the seller allow you to pick your own title company. Just another thing to know up front that you will be closing at the title company of the lender’s choice.

Tip#7: Predication Work

My last tip of the day has to do with Predication Work. When you are purchasing a home, an appraiser goes out to appraise the property. At that time, they are going to make sure the home is in livable condition. If anything they find that they think needs to be fixed prior to the lender lending on the property, they will let them know. The issue with this is that the bank will not allow any repairs to be made prior to closing.  There are loan programs that can get around this such as FHA 203k loans and Escrow Repair Accounts, but it is important to know your options upfront in case this situation arises.

These are my tips for buying a foreclosure. I hope you found them helpful.

To get on my FREE FORECLOSURE LIST, where you will receive daily updates of foreclosures for sale in the St. Louis Market:

Email

hayley@jfmeyerrealty.com

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314-229-2009