When people talk about buying “foreclosures,” they may be talking about picking up properties in any one of three different stages of foreclosure. Here, we will discuss homes that have been repossessed by the lender through the foreclosure process. (To learn more about buying “pre-foreclosures” or buying foreclosures on the court house steps, click here.)
Bank repossessed properties represent some of the best real estate values. Sometimes called “REO’s” for Real Estate Owned by banks, foreclosures are often priced below market value. Unlike short sales, you usually know if your offer was accepted or rejected within 24-72 hours (sometimes the bank takes longer.)
In addition to submitting your offer, the selling bank will require you to sign a multi-page addendum that says the bank is not responsible for any issues with the property and, if you agree to accept the property after you do your inspections, you will not sue them for any problems you find at a later date.
Once you have heard your offer has been accepted, you will have a relatively brief amount of time, typically 7-12 days depending on the selling bank, during which you can do your inspections.
Similar to short sales, you are unlikely to negotiate any repairs with one exception: if the house will be your primary residence AND your lender requires the repair as a condition of approving your loan. For example, most lenders won’t approve a home loan if the cooking stove or the home’s heating system isn’t working. Frequently, but not always, the bank selling the property will make those type of repairs if specified by your lender, however expect the repairs to be done in an inexpensive manner. All other repairs will be your responsibility after you close on the house.
Whether purchasing a short sale or a foreclosure, it’s important to understand that the banks work on their own time table. They often do things that simply do not make sense. When this happens, it will be natural to think your agent must be doing something to mess up the deal. Of course, maybe he is, but in the case of short sales or foreclosures, give him the benefit of the doubt.