8 Things to Consider Before Buying a Home in Foreclosure
By Julie DeLong, A-1 Freeman Moving Group
Foreclosures are like no other home sale experience, especially for the buyers. When a home is sold in foreclosure, this means that a bank or financial entity has taken possession of the property because the mortgage was not paid. The bank wants to sell the home as quickly as possible to make back what they lent. In other sales, the buyer is dealing with a seller and their agent. In a foreclosure, you are dealing with a bank who has zero interest in the property itself and no intention of making changes before or during the sale.
So, you will need to approach a foreclosure home purchase a little differently. We are here to share some helpful considerations when buying a home in foreclosure.
Foreclosures Offer No Seller Courtesies
A bank is not a normal home seller. They are not invested in the home, except for the money they want to get back. A bank does not guarantee that a home is in good quality or that repairs will be made before the sale. In fact, many foreclosure homes are in disrepair due to related financial circumstances of the previous owner.
The bank takes ownership of the property and puts in on the market. As a buyer, you cannot expect the usual seller courtesies because the bank will not engage in this way.
Buying a Home "As-Is"
Foreclosure homes are sold as-is, with no repairs or improvements made between listing and closing. A home marketed as move-in ready should be in good repair with working utilities, and you can bargain to make sure that is true. As-is means that a home is sold in whatever condition it hits the market.
This means any repair problems or even utility failures related to the property become the buyers. You get the home in whatever state the last owner chose to leave it in. It might be spotless, or it might be trashed. It is up to you to determine the value.
Visit the Property In-Person
Because foreclosures are sold as-is, you are responsible for determining the current quality. This means that you must visit a foreclosure home in person or ask someone you trust to be your agent in this tour. Visit the property at least once and take a tour through the building. Test the faucets, lights, and structural integrity. Judge with your own senses if the place is damaged or in good condition.
Invest in a Complete Professional Inspection
Then hire an inspector. Any home purchase should include a complete home inspection from a neutral third party. Inspection is especially important with foreclosure homes where repairs and quality are not assured. You get whatever state the house is in. It is worth investing in an in-depth professional inspection to know the quality of everything from the roof to the foundation.
Bid with Complete Financial Preparation
Have your finances ready to go. A bank wants bidders to start the paperwork as efficiently as possible. This means you have a better chance of buying, and at a good price, if you are ready to start the closing process on the same day that you bid. Get your loan pre-approved (not just pre-qualified). Have your earnest money ready and consult with your real estate agent or lawyer on any other preparatory paperwork.
Expect Closing Delays
While the bank will want to start the sale pronto, you can also expect closing to take an unusually long time. Foreclosure sales are often wrapped up in bureaucratic process. The sale may need to be assessed and approved by several layers before you can close, pay, and receive the keys. Expect this and be ready to wait out the delay with patience.
Weigh Your Renovation Costs
When you are deciding your home buying budget, do not forget to calculate for renovation costs. Foreclosures can be a great deal, but only if your repair costs do not exceed your sale savings. Remember to include the approximate cost of fixing up and customizing the home as part of your budgeted purchase price.
Negotiate to Lower the Price
If you do find serious problems with the house like wrecked plumbing or roof damage, the bank will not fix it. But you might be able to negotiate for a discount. Instead of asking for move-in ready repairs, haggle the price down when there are problems with the home. Reference your inspection and use reasonable repair quotes to negotiate for reasonable value deductions. You might just save your renovation costs this way.
Buying a foreclosure home can be a smart decision if you find the right property and calculate your costs. Once you wrangle the sale, you will need a professional moving company to help you with the move. Contact us today to consult on the moving services you need for your new home.
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