If you are considering purchasing a foreclosed home, it is a good idea to have some knowledge of what to expect. The foreclosure buying process is very similar to a traditional home purchase…with a few twists.
Keep in mind that you are dealing with a banking institution, or a trustee working for the banking institution. These people have very specific rule books that they follow, and the rule books don’t necessarily make sense, at least on the surface….
- Expect delays…if the rule book gives the banker two business days, most will take two business days. If they take longer…well, they make the rules.
- Don’t expect compassion…the bank is only looking at the bottom line. They don’t care if your appraiser has a problem with the roof, if your offer is all cash, or even if you send them pictures of how ugly the house is.
- The rules normally require that the home be marketed to the general public, as is, and that the highest and best offer for the bank be accepted. The banker probably cannot re-negotiate the price after your inspection…even if it makes sense. HUD, for example, just puts the property back on the market rather than negotiating anything.
Pricing Foreclosures…the term foreclosure brings to mind infomercials about buying homes for pennies on the dollar. There is a reason that the infomercial people are selling books, rather than out shopping for real estate. Rule #1, if it sounds to good to be true, it probably is (or it’s a short sale).
Too good to be true? …when shopping for homes with an average price of 225K, you find a similar home priced at 175K…don’t think it’s an accident, there is a reason which may not be apparent in the photos.
Foreclosures are priced aggressively in order to get them sold quickly, but the bank’s don’t give them away. If they did, the shareholders might get upset. My experience is that foreclosures are typically priced 2-5% below retail, and that all are negotiable to a point.
When making an offer, again remember that you are not dealing with an emotional seller. If your offer is complicated, if you need more time to close, if the home needs repairs…the asset manager doesn’t care. A fast closing may put your offer in a stronger position…but cash versus a loan doesn’t carry much weight.
Inspections…Get an inspection! The bank may not be willing to make repairs (“as is” usually means “as is”), but the inspection does give you piece of mind, and lets you know what you are working with.
Closing: Come closing time, keep in mind that once again, you are dealing with a banker or bank representative. You may be willing to jump thru hoops to get signed/closed, but the seller may not be. Be prepared to be flexible both in timing, and in other aspects of the closing. For example there may not be a full set of keys for the home, it may not be cleaned prior to closing, and any debris that was in the home when you looked at it will probably still be there at closing.
A large percentage of homes sold recently in Pierce and Thurston Counties are foreclosures…as many as 40%. They can be, and often are, great deals…but you as a buyer should prepare yourself the unexpected, and take the surprises in stride…you are getting a good deal after-all, or else you wouldn’t be buying a foreclosure.
