Foreclosed Properties - 5 Important Distinctions

From Military.com By: Joe Gladden

Here are five important distinctions that make a foreclosed property different than a typical home sale.

1) You are negotiating with an unemotional bank, not an individual.
Ultimately the bank will have a bottom line established by the officer or board. Whether or not the home sells does not directly impact an individual or their personal finances. And that bottom line may or may not be below market value.

2) Banks rely heavily on processes and procedures … which take time.
Do not expect the negotiations and decisions to move quickly. As opposed to the conventional negotiations with individual sellers, negotiations will not continue past normal working hours or into weekends. Likewise, expect the bank to impose additional contract requirements such as specific disclosures and addendums that will further encumber the process.

3) Most banks will list and sell the property “as is.”
This term has specific legal meaning and may vary by state laws and traditions. It may mean that the bank requires the purchaser to sign a disclosure or addendum that precludes negotiations based on a home inspection and / or the traditional pre-settlement walk through inspection. So, before you sign a contract on a foreclosure property, you may want to seek permission from the bank to complete the home inspection before making the contractual offer.

4) Foreclosures are truly a sad event and it is likely that the previous owner would not maintain the property in excellent condition during the process.
Some angry owners may in fact inflict intentional damage to the property upon departure. You should also consider that some or all of the utilities may be disconnected. It is even possible that utility meters have been removed, which can be quite expensive to reinstate. This can obviously present additional concerns and expenses as water seals in plumbing may dry out, the home may have been without heat or air conditioning for a period of time. All of these circumstances can increase your costs.

5) Although it is hard to believe, some states have a “Redemption” law.
This law allows previous owners to “Redeem” their home … even after the sale by paying off their debt. Each Redemption State may have different laws. You should do very careful research on this aspect of buying foreclosures, and consult an attorney, before you write the contract.