Look before you leap into buying a foreclosed property
That house may look like a steal, but it could be an ordeal
You could go broke saving money. That was one of my father's favorite admonitions, which I'd hear after bringing home a bagful of bargains that I found at a sale.
Now my dad's wise words come to mind when I hear people say they're thinking about buying foreclosed homes.
You could go broke saving money on foreclosures if you assume the prices are low enough to make them genuine bargains. And you could go broke if you don't have a well-thought-out (and priced-out) plan for rehabbing the house, if necessary.
Banks don't want to give away foreclosed properties, of course. They don't want to put more money into them to make them attractive to buyers, either.
In some cases, it will take quite a bit of money to make a foreclosed home fit for habitation. Homeowners struggling to make their mortgage payments don't spend money on maintenance. Some enact their own scorched-earth policy before they lose the house to the bank. They may sell valuable appliances and fixtures or even vandalize the home. A home left unoccupied can be taken over by mold, insects or animals.
Before such homes are listed for sale with a real estate agent, they can sit empty for weeks while the lender that foreclosed sorts through claims from other lien holders and makes sure the title is clear.
Some of the other bank-owned properties may appear to be in decent condition, at least superficially. Some of them have sloppy, garish interior paint that proved why "builder beige" is such a practical choice for walls and carpet in a home that's for sale.
If you plan to purchase a foreclosed property, we suggest to always insist on a professional inspection. Banks typically won't lower their price in response to the inspector's report, but you need to know whether a house that has been vacant for months has heating, plumbing and electrical systems that can come back to life once your name is on the deed, or how much it will cost if they don't.
We also suggest to not buy a foreclosed home without taking the optional title insurance policy. That would protect your investment if old liens, such as those from unpaid contractors, appear after closing. As part of your negotiations, we always suggest to ask the bank to pick up the cost of your policy.
Finally, be prepared to wait. This can be a long process!
That house may look like a steal, but it could be an ordeal
You could go broke saving money. That was one of my father's favorite admonitions, which I'd hear after bringing home a bagful of bargains that I found at a sale.
Now my dad's wise words come to mind when I hear people say they're thinking about buying foreclosed homes.
You could go broke saving money on foreclosures if you assume the prices are low enough to make them genuine bargains. And you could go broke if you don't have a well-thought-out (and priced-out) plan for rehabbing the house, if necessary.
Banks don't want to give away foreclosed properties, of course. They don't want to put more money into them to make them attractive to buyers, either.
In some cases, it will take quite a bit of money to make a foreclosed home fit for habitation. Homeowners struggling to make their mortgage payments don't spend money on maintenance. Some enact their own scorched-earth policy before they lose the house to the bank. They may sell valuable appliances and fixtures or even vandalize the home. A home left unoccupied can be taken over by mold, insects or animals.
Before such homes are listed for sale with a real estate agent, they can sit empty for weeks while the lender that foreclosed sorts through claims from other lien holders and makes sure the title is clear.
Some of the other bank-owned properties may appear to be in decent condition, at least superficially. Some of them have sloppy, garish interior paint that proved why "builder beige" is such a practical choice for walls and carpet in a home that's for sale.
If you plan to purchase a foreclosed property, we suggest to always insist on a professional inspection. Banks typically won't lower their price in response to the inspector's report, but you need to know whether a house that has been vacant for months has heating, plumbing and electrical systems that can come back to life once your name is on the deed, or how much it will cost if they don't.
We also suggest to not buy a foreclosed home without taking the optional title insurance policy. That would protect your investment if old liens, such as those from unpaid contractors, appear after closing. As part of your negotiations, we always suggest to ask the bank to pick up the cost of your policy.
Finally, be prepared to wait. This can be a long process!
Visit us @ www.mmgproperties.com to contact us and talk in person.
Brian Malcolm & Monica Manocha Re, CMRS
The Malcolm & Manocha Group
Direct: 408 399 1495 or Cell: 408 930 5623
