My husband and I are thinking to buy a home that had been foreclosed…is this wise or are there things we should look out for…granted anytime you buy a home there are things to look out for…but with a foreclosure is there any extra things to look out for?
9 thoughts on “Is it wise to buy a foreclosure?”
Leave a Reply
You must be logged in to post a comment.
I found a VERY (V_E_R_Y) good article about foreclosure here:http://buy-a-foreclosure.blogspot.com/
Good luck!
Make sure you have a "clear title" and a REALLY good home inspection.
Good luck,
-D
Suze Orman just did a show on this recently. She says there are lots of things you need to know before jumping into something like this. Maybe you should go check out her web site and see what she says. She didn’t sound like it was a very good idea, by the way…..
good luck!
I would worry they had relatives nearby or were vindictive psychopaths. Only way would be if it were vacant for like a year. By then they may not be AS angry at losing it and thus less angry at you for buying it.
This is one of those times that a couple hundred bucks to a real estate attorney is worthwhile. It varies among states, but the law permits owners to buy back their home within time limits after forclosure, but most don’t because of additional penalties, interest, fees, etc. Still, you don’t want to find out that the house you thought you owned isn’t really yours after all. You shouldn’t LOSE any money on it, but you may have some plans for it severely interrupted. Given that you expectantly should be saving thousands of dollars in buying a foreclosure, spend a couple hundred extra to make sure everything’s kosher.
Foreclosures are usually properties in considerable need of repair due to the previous owner not being financially capable of taking care of them. They are typically priced a bit less than their worth. They are then put on the market and the public is allowed to competitively bid on them. Go to hud.com for details.
Buying a foreclosure is an excellent idea in today’s market. You would be crazy not to consider it.
You take the same precautions as you do buying any home — have it inspected, check the title, get owner’s title insurance, etc. The process is a little more irritating because bank-owners are slow to respond when it comes time to buy.
I say go for it.
You need to thoroughly understand the process of foreclosure before you try it.
In most states the foreclosure process is regulated by strict laws. The process of foreclosure usually takes about 5 to 6 months, not including the time to actually evict the former owner or his tenants. During that period of time the owner of the property is allowed to cure his default. He can usually do so until about 5 business days prior to the sale. If he goes beyond that point he can only cure by paying off the entire balance. As a result, many homes that are "in foreclosure" do not go all the way through the process and remain with the original owners.
In most foreclosures, where the auction price is "below market" the owners often will refinance, sell, or file for bankruptcy long before the date of the auction. What this means to you is that you will investigate a hundred foreclosures before finding one that actually goes to sale.
Bidding at a foreclosure sale can be VERY tricky. Remember – it is not always the first deed of trust that is being foreclosed. So if you see a foreclosure auction where the price seems very low, the chances are that the foreclosure is on a second or third mortgage or deed of trust. If you bid at such an auction, you will NOT be buying a first position, you will be buying a second or third position and will take the property "subject to" any prior liens, mortgages or deeds of trust. If you intend to bid at a foreclosure, you should ALWAYS get a preliminary title insurance policy or have your attorney check the title and tell you what you are bidding on. Even if it is a first deed of trust, and even if it is a bargain, the property may be a toxic waste dump or have other problems and as the purchaser at a foreclosure sale you would be required to clean it up. The property may contain a burned out structure that needs to be demolished, and you will have to pay to demolish it. If it is vacant land, the property may be an undersized lot or otherwise unbuildable. If it has a building on it, the building may have extensive dry rot, termites or other problems. Once you purchase it you will have to repair this damage. You don’t get to inspect the home prior to bidding and you have to take it "as is".
Obviously, if the home is occupied, you will have to evict the tenants. This can take two or three months and can cost you a couple of thousand dollars in attorneys fees and costs.
Last, but certainly not least, is the fact that you must pay all cash at most foreclosure sales. No bank will usually finance such a purchase.
I own a foreclosure company, and my advice to you is to contact the REO department of your local bank or Savings and Loan. You might also check with FHA or HUD, as both of these agencies re-sell properties that they have foreclosed upon.
After a bank or S&L forecloses and takes back property, they evict the occupants and put the home up for sale. Federal law prohibits them from holding onto too much foreclosed property, and they are usually anxious to get rid of them. These properties are usually priced below market and you get to inspect the property and can usually finance the property through the bank that did the foreclosure.
Hope that helps!!