“I want to buy a foreclosure.” I hear this all the time, but I often question the motivation.  I’m not going to disagree that there are a lot of good deals on the market.  Is the reason for the purchase because it’s a foreclosure or is it because we automatically assume that FORECLOSURE = BARGAIN?

Let’s take a step back and start the process over. “I want to buy a home.” To this I say bravo it’s a good move for your future and home ownership is part of the American dream.  Our home search will include any foreclosed properties that are available in your price range, but lets not limit ourselves to bank owned properties. 

“But aren’t all the good deals foreclosures?”

Simply stated no they aren’t.  Most buyers don’t realize the kind of situation they encounter when buying a foreclosure.  Get used to seeing the words “AS IS.”

You might think well I bought my car that way and it’s doing just fine.  Here is the deal, when you purchase a home owned by a bank you are committing to that house with nothing changed.  You can have a home inspection for your personal knowledge but you cannot ask the bank to fix anything because it’s being sold “AS IS.”

Now, when you buy from a home owner, you can ask for any defects in the property to be corrected before purchase.  This could be a failed septic, a new roof, and so on (costly repairs).  This is a negotiating point that you will never have with a foreclosure.

FINANCING

I think we can all agree that we hate banks, but we still need them.  So lets further discuss a foreclosure vs. a privately owned home in this department.  Don’t forget what you just read because it’s going to come back in a few lines of text.

Most buyers in the market today desire to use a USDA or an FHA loan.  These loans are fantastic products and require as little as 3.5% down, but there is a catch.  The properties have to meet a certain standard.  The electrical has to be up to date, the heating/cooling systems operational, no holes in the wall, and so on.  The standard for these loans is very high.  The home simply stated has to be in move in condition with little to nothing to repair. 

Now if you have a private buyer usually anything that wouldn’t be approved for the loan can be corrected before settlement so that the home can qualify for the loan.  Again the bargaining stand point here is far superior to a foreclosure.  The seller wants to sell and the buyer wants to buy so usually something can be worked out to make everyone happy. 

UTILITIES

This one will really get you thinking especially in the winter.  It’s very common for foreclosed properties to have all of the utilities turned of.  No electric, no water/sewer, nothing.  So I’m guessing you, Mr/Mrs. reader are thinking “well who cares about that.”  The BANK does.  When the appraiser comes out to place a value on the property they need to check to make sure everything is operational.  This means the electric and water need to be turned on, but there is more.  The bank will not turn these utilities on, so you have to put the utilities in your name before you even own the property.  If the property doesn’t close you are out utility bills. 

If the property is being sold in the winter, the property will most likely be winterized.  This is done to prevent any breaking of pipes due to cold weather.  It’s the buyers responsibility to take care of getting the house de-winterized and re-winterized after the appraiser is there.  The buyer will oftentimes have the option to keep the utilities turned on until settlement to avoid having to re-winterize the property.

Homes that are owned privately will typically have the utility bills in the name of the seller so the above can be avoided completely. 

Final thoughts…

Buying foreclosed homes can result in great deals, and potentially built in equity.  These are both good things.  The important thing about buying a foreclosure is to enter a buyer’s agreement with a qualified Realtor.  A Realtor that knows the standards for whatever type of loan you are using.  A Realtor that has the necessary contacts to mitigate any potential issue.  Without the advice of a knowledgeable real estate professional these can be very tricky transactions.  I’d highly suggest hunting down someone that has experience in this field.  Our job is to get you a great deal, but also get the deal from contract to settlement. 

If you’re looking for a home in Adams or York county, give me a call.  I’ve done many foreclosure sales and have all the necessary tools to get the transaction completed.

 

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