More about Merrimack Valley Real Estate

Home Buyers and the Foreclosed Home- Deal or No Deal!!

There is a lot of news media how bank owned properties (also called Foreclosed, REO) are on the rise.  Many buyers are out sorting through these foreclosed home to find the deal of the century. Is a foreclosed home really a deal?

Maybe is the true answer.   In areas where there are large numbers of distressed homes the bank may be willing to give up as much as 20% of fair market value to get the home off the banks books.  From town to town situations may vary.  In a very short distance you can have a small depressed city where the banks just want to get rid of properties and only miles away you will have a community with very few foreclosures where bank are less likely to negotiate.

Here are some tips if you are considering buying a foreclosed home:

1. Don't buy a foreclosed home unless it is the right area and the right home.  Price should never be your deciding factor when buying a home.
   
2. Do your math.  Many of these homes have been vacant for a long period of time and can have a myriad of problems.  Water in the basement, broken pipes and mold are big issues that we see as the electric gets turned off and the house is not winterized properly and sump pumps don't work.   Does the price of the home justify the amount of work that needs to be done?
3. Many homeowners have deferred maintenance on these foreclosed home.  If they can't afford the payments they probably can't afford basic repairs.  Again do your math!!
4. Just because it is a bank owned property don't assume its a good deal.  Carefully review the areas comparable properties.  Remember somebody 100's maybe 1000's of miles  away who has never seen the home is making decisions on a foreclosed property.
5. Do your homework.  The seller (the bank) has never lived in the property.  The property is sold as is and there are usually no disclosures on the property.  You need to be extra vigilante when buying a foreclosed home.
6. Hire an inspector.  Many times it is difficult to get the utilities turned on or there is a fee of several hundred dollars to get the utilities turned on.  Do not buy a home that you cannot fully test all systems and make sure you are hiring a top notch inspector.
7. Use a lawyer.  A foreclosure is complicated.  Make sure you use an attorney to look over your shoulder so no mistakes are made.  There can be many title issues with distressed properties as well as liens that can supersede a sale and you want to make sure you are protected.
8. If you do decide to buy a foreclosed home that needs work, make sure you have the money to do the necessary repairs.
9. The bank will not do any repairs to put a deal together.  Your are buying the house "as is".

Foreclosures can be very complicated and nerve wracking but some deals can be had.  At the same time, don't overlook properties that are traditionally on the market, just as many good deals can be had with the traditional sellers and can definitely be much less of a hassle to buy.