10 unpleasant realities about the foreclosure process

Many buyers feel that the path to purchasing a great home is buying a foreclosure. For a buyer who has done his or her homework, a foreclosed home could be a great buy. But often, buyers are misinformed with regards to the realities of the foreclosure process. As a result of improving market conditions increasing efforts to prepare and market homes to owner-occupants, not all foreclosure properties are true bargains.

What should a buyer know about foreclosure?

1. Like Forrest Gump said, “You never know what you’re gonna get”

Because the bank never has occupied the property it is selling, it has no background about how the home was maintained or of the condition of the property. Most foreclosure properties are sold “as-is,” which puts the burden of inspections and due diligence on the buyer.

This is why it is critical for buyers to conduct inspections and fully look into the property and neighborhood. Buyers should even consider talking with neighbors to try and get the maximum amount of information regarding the property’s history as possible.

2. Not all financing is created equal

Properties must meet certain lending requirements based on the condition of the property for being certified for financing.

As an example, a home with broken windows, no flooring or no heat source might prohibit a lending institution from moving forward with many of the common home loan programs available to buyers.

3. The process is usually tedious and lengthy

Every bank and institution has a foreclosure protocol. Many are more efficient than the others. Depending on the entity, and oftentimes the individual asset manager, you as a buyer could face a smooth transaction or a long, drawn-out nightmare.

4. Buyers could possibly have more upfront costs

A selling entity might offer the buyer a credit for costs on the closing statement, but most of banks or selling entities will not pay any upfront costs associated with facilitating the transaction.

Upfront costs for inspections, appraisals or maybe utilities might be the initial responsibility of the buyer.

5. Want repairs? You’re out of luck

Most foreclosed properties are purchased “as-is.” A bank might work with a buyer to negotiate the cost of a lender-required repair. In turn, a buyer should expect to be asked to offset the repair cost by either taking a reduction in his or her closing cost credit or increasing the sales price.

6. Think you can get a deep discount? You better think again

Don’t assume all banks will take a deep discount to move a home. Many banks and selling firms do their homework and consult with their listing agents to prepare opinions of price before listing the property.

Many of them are priced at market value, and a buyer should expect to pay near the asking price should they want the home.

7. Think twice, and the house may very well be gone

Because many foreclosures are priced at market value, in good markets, many of them will sell quickly. If a buyer finds a foreclosure property they could possibly be interested in, it is important for them to taking action immediately.

You should be ready to make an offer to reduce their likelihood of having to compete for the home or losing out altogether.

8. An unskilled agent can muddy the waters

An inexperienced agent is not a bad agent. But, an agent experienced with foreclosure properties is an asset.

An experienced agent will know the best way to structure an offer for a buyer so it is favorable to a bank. They will also have a concept of what upfront issues could possibly be called out by an appraiser or will know what prep-work to do with the title company to check for problems that might hinder the closing process.

9. Need utilities for inspections? It’s your problem

Some banks make the buyers responsible for activating utilities for inspections. In some cases, a buyer needs to be willing to work with the utility companies to pay for connection fees to get the home inspected.

10. Title work can be a problem

It is essential to perform a little investigating at the title company before submitting an offer on a foreclosure. Not all banks and selling entities are efficient with regards to having all the appropriate title work in place before listing the property.

Outstanding liens or chain of title issues may very well be discovered when escrow is opened – causing delays in closing.

Hopefully, these suggestions will help you in knowing what to expect. Pursuing foreclosure properties can be a great find when you have the right expectations and mindset going into the process.

Here in the Tampa Bay and Surrounding Areas, we have homes coming on the market daily. The percentage that are traditional sellers has risen and the amount of foreclosures and short sale is dwindling. If you ready to find your next home, Nick & Cindy Davis are ready to get started working for you. To contact us simply click here or you can always call us at 813-300-7116.

Take a look at a few of the most recent homes that came on the market here in the Tampa Area.

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6338 Newtown Circle #38A6, Tampa, FL

6338 Newtown Circle #38A6
Tampa, FL

$160,000
- Lot Size
  
  436 sqft
- Home Size
  
  1,502 sqft
- Beds
  
  3 Beds
- Baths
  
  3 Baths
- Year Built
  
  1979
- Days on Market
  
  2
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