Buying a Foreclosure: What Do Buyers Need to Know?

Due to the downturn in the real estate market and the prolonged poor economy foreclosure properties are more prevalent. In addition, interest in purchasing these foreclosures is on the rise as word is getting around that real estate is selling well below market value. What people are not hearing as much about is that there are potential problems and that not all deals are that great. This is due primarily because many people do not like to talk about the financial mistakes that they make, especially when the amount is significant. As a result, many people are not aware of the pitfalls when they consider purchasing a foreclosed property.

A while back, I was looking to purchase a home and thinking that I could get a great deal, I began seeking out foreclosed houses. Fortunately, my realtor gave me some professional advice concerning investing in a foreclosure property. In addition, I had a friend who was a professional real estate inspector and appraiser. He told me that any property that I was considering making an offer on that he would inspect the home for me free.

The home inspection is essential because banks that own real estate because of a foreclosure do not make any warrantees and they seldom make any disclosures. In many instances, the financial institution that is selling the property is not in the immediate area and they have no idea of the property’s condition.

One of the reasons many homes end up as foreclosures is because the homeowner learned that something major was wrong with the property and that it was too costly for them to fix. Some problems can be obvious such as damaged walls and ceilings. However, many hidden problems may be lurking that the average consumer is not able to detect until after they have purchased the home such as radon or mold.

Besides the physical condition of a property, a potential buyer needs to have a title search performed in order to determine if there are any liens against the property. If there is any tax, weed, or mechanic’s liens that encumbers the title, new homeowners will be liable to settle those liens before they can receive title to the property. Liens can cost from several hundreds of dollars to tens of thousands of dollars.

Another legal problem that people can experience when attempting to purchase foreclosure properties is that banks usually have different types of contracts. Individuals need to make sure that they thoroughly understand any contract for purchase before they sign it. The buyer’s realtor or real estate attorney can explain items in a contract that they do not understand. Anyone buying or selling real estate should have a realtor representing him or her. While there are many books out there pertaining to making a living or getting rich by buying and selling real estate, laws vary between states and very few people have adequate education in real estate to go it alone. Besides, in most real estate situations, buyers do not pay the realtor any fees for helping them buy. The buyer will have to pay for some expenses such as inspection and title search, but these expenses may well save the buyer money in the event that there are any serious problems with the property.

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