Buying A Foreclosure Home!

When working with buyers, one of the first questions everyone asks is “What about Foreclosures?”  Foreclosures can represent a great deal, but there are some tips to making sure that a foreclosure property is the right home for you:

•  As Is Sale:  All foreclosures are sold “as is”.  This means that the bank will do no repairs.  However, the banks will allow you to do your inspections to see what repairs are needed.  Once you have done your inspections, you will only have 2 choices:  take the property in it’s current condition and continue forward to closing, or you can usually rescind the contract based on the repairs needed.  With all foreclosures, there is no negotiating of any repair addendums.

• Look at the House:  The condition of foreclosure properties can run the gamut from being pretty well taken care of to being totally destroyed as the homeowners were walking out the door.  Sometimes you may find homes which were vandalized because they sat empty for so long.  The condition of the home that you can see may be an indication of needed repairs in those areas you can’t see.

• Look at the Landscaping:  Many times a neglected landscaping can be an indication of the condition of the rest of the home.  Tree roots can crack walkways and driveways, and vegetation can get into foundations & windows & chimneys.  Sometimes, a neglected landscaping can also work in your favor, as the curb appeal of the house may turn off some buyers from even looking at it. 

• Look at the Neighborhood:  The house itself may seem like a great deal, but if you don’t like the neighborhood, or are uncomfortable with the neighborhood, then is it a really great deal?  Check out the neighborhood – come by at various times of the day to make sure it is a neighborhood you will want to live in for a long time after closing.

• Has the house been winterized?  You want to make sure that the house has been winterized.  If the house has been winterized, this means that a plumber came in and drained out the water in the pipes & took the proper measures to make sure that the pipes won’t freeze during the winter months.  Before beginning any inspections, you will need to pay to have a licensed plumber come in and unwinterize the property so that when you do your inspections, you won’t burn up the hot water heater or have unexpected flooding to do more any damage to the house.

• Make sure the property will qualify for the type of financing you are using to purchase the home:  Many buyers today, especially first time homebuyers, are using government loans:  FHA, VHDA, VA.  These loan programs have certain requirements a house has to meet in order to qualify for the loan.   For instance, older homes with peeling lead based paint may not qualify for a government loan; perhaps the outside cooling units are gone; perhaps there is structural damage; perhaps there are safety hazards inside or outside of the house.  Before making an offer on a foreclosure home, you need to make sure that the house will qualify for a government loan, or be qualified to buy the house with either a renovation loan or a conventional loan.

• Have a Comparative Market Analysis (CMA):  When you are purchasing a foreclosure you want to make sure that the price you will be paying, as well as the cost of any and all repairs and upgrades you need to do to the house after closing will not go beyond the market value of the neighborhood.  Even with a great purchase price, you certainly do not want to overpay for a home in the neighborhood.

• Be Patient:  Many times the banks do not move as fast as the homebuyers would normally like.  Sometimes it may takes weeks for a bank to respond to your offer.  Sometimes they may respond to your offer quickly, but then take a very long time to get you a fully ratified contract back.  Sometimes the title company for the seller will not have the title work back to your settlement agent in a timely manner and this can delay your closing.  Patience is a virtue with the banks.

So, at  the end of the day, foreclosures can be a great buy for someone, but you need to be aware of the unique issues that surround buying a foreclosure property.   

Thinking of purchasing a foreclosure home?  Click Here to email me and I will be happy to email you all foreclosure homes for sale in the Richmond VA area!