We’ll give you 5 Top Tips in buying it right! Foreclosures can be a tricky purchase due to several issues that can arise in the home buying process. With the last few years giving us more foreclosures on the market than usual, everyone is looking for a great deal. You can get a deal and sometimes a steal, if you play your cards right.
The big lure of foreclosures is the price… but it comes at a cost. All bank owned properties are sold “AS IS” with no seller’s disclosure of the property and most of the time sold granting the buyer a Special Warranty Deed, not a General Warranty Deed.
#1) Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage is a huge advantage over other foreclosure buyers you may be competing against. Having a pre-approval letter to submit with your offer significantly increases your odds with the bank’s opinion of you. It says you can actually go through with what you are claiming in your offer. Banks mostly require a pre-approval letter to be submitted and if you already have this done, you can make the offer on the spot… not having to wait to get pre-approved.
#2) Get a Home Inspection
When buying a foreclosure, getting a home inspection is a must and can be worth its weight in gold! A good home inspector can give you insight into a home that even the seller wouldn’t be aware of most times. Over time, a home can fall into disrepair in areas that can’t be seen. Home inspectors have a huge checklist to go through from checking the attic vents for leaks to checking the plumbing connections under the kitchen sink. They can give you a very detailed report with pictures of concerned issues which is very helpful in making an offer. Another big reason you want a home inspector is to check for Chinese drywall. This is still a big issue today since a lot of homes had drywall repairs after Hurricane Katrina. Chinese drywall can be very harmful to people and pets… and the house suffers as well.
#3) Check With the Home Owner’s Association (HOA)
More times than most, buyers do not check with the Home Owner’s Association before putting in an offer. Not only do you want to see if the past property owners paid their HOA dues which may be due, you want to ask people in the HOA about the neighborhood and the property if they know of any past issues. When dealing with a bank foreclosure, the bank doesn’t have any knowledge of the property’s history and they are exempt from filling out a “Property Condition Disclosure Statement”. Another thing you want to get from the HOA (if there is one), is to get a copy of the restrictive covenants. This way, you won’t be surprised after you move in that you can’t erect a fence or have pets.
#4) Read the Fine Print
Before putting in an offer on a bank owned foreclosure, you will have to sign off on the bank’s disclosure package. Sometimes it can be 50-60 pages of fine print… some pertaining to you on this specific property, some not. The reason there are so many pages is because of so many different types of properties and issues the banks have had when foreclosing on properties across the United States. Here on the Mississippi Gulf Coast, we don’t have to worry much about snow or basements, but some of the disclosures you may have to sign could pertain to these. When I say “have to sign”, I mean it. All banks will not accept an offer on any of their foreclosures without having the paperwork on their side. This is what you are giving up for price… some liability. I say “some liability” because if you do what we are saying here, your liability will be reduced.
#5) Find Out Why It Was Foreclosed
If the house was foreclosed… why? Was it the layout? Was it not priced correctly? Was it listed previously? If it was listed, compare the old and current listings to see if you can see any discrepancies. We have another blog article named “Looking to Sell? Here’s the Top 5 Reasons Why It May Not”. Read this article to see why this house didn’t sell. It could have been the location, functionality or condition. Whatever it was… you want to try to figure it out before you make an offer, not after you move in. If you need to sell the home later, you want to be able to without surprises. The more you do now, the better off you will be!