Buying A Foreclosure? Read This First

Many home buyers looking for bargains are turning to foreclosures and discovering that the toughest challenge is not finding the property, but dealing with the banks that repossessed the homes. Although most banks are quick to accept a bid and write a contract, some buyers report that as closing approaches, issues, such as liens and rights to the property, arise.

Here's what you should know:

Purchasing a home from a bank is much different than buying from a homeowner. If a problem is found during the home-buying process, it may take the bank longer to resolve the issue than it would a homeowner. As with short sales, home buyers need to be aware that foreclosures can take longer because most banks are overwhelmed with properties and do not have enough qualified staff to handle all requests.

In previous years, when home prices were increasing, banks didn’t have to keep foreclosed homes on their books long. Often, investors would purchase the foreclosures through court auctions. However, as home prices declined, especially in the past two years, many investors decided to delay purchasing new properties. Banks then had to concentrate their efforts on selling to the general public, which often takes longer.

When a bank repossesses a home, it typically engages a lawyer to determine whether there are other claims on the property. Generally, the lawyer only is paid to look at the time from when the owners took out the mortgage to the time the bank repossessed the house. Any pre-existing problems, or new ones, usually surface at closing time, when a more thorough search is performed. IMPORTANT: Buyers need to be aware that any pre-existing or new problems are only found through the buyers inspections. The bank (not living on the propery) has no idea what condition the house is in and therefore will not disclose any problems. Buyers should be very certain that their inspections are done thoroughly and by licensed inspectors.

Buyers should be aware that banks usually sell homes in an “as-is” condition, and on their own terms. Meaning that the banks usually will not mend any problems found during inspections. Although buyers are informed prior to beginning the home-buying process, some are unwilling to agree to the bank’s terms when it’s time to finalize the deal and sign addendums to the contract.