You’ve spent months aimlessly searching through current homes for sale. You’ve gone to a few open houses and your agent has taken you through some homes. But nothing has been exactly what you wanted. Then, you find a home that just feels right. As fate would have it, the house is a foreclosed home. You think to yourself, “Great. Just my luck.”
Foreclosed homes are semi-notorious for being a pain to buy. You don’t get to talk to the previous homeowner and the bank takes their sweet time processing information. But none of this is to say that you shouldn’t buy a foreclosed home. You just need to be prepared for what’s to come.
No Warm & Fuzzy Feelings
You’re not buying the home from the person who lived there, you’re buying it from the bank. They don’t see the home as a warm, inviting place filled with memories. It’s just as an asset that they’re trying to sell. You won’t be able to woo the bank with your charming personality, all they care about is numbers. That being said, if you’re thinking about buying a foreclosed home, a real estate owned (REO) property is the safest way to go. Banks might be a hassle, but they’ll let you take precautions (like performing a home inspection) before you sign a check.
It’s a Numbers Game
Foreclosed homes are known for being a good deal, in terms of price. The bank views the home as an asset that it doesn’t want. There’s no emotion attached to the price of the home, so you avoid the bias of the endowment effect. But a foreclosed home doesn’t always mean a good deal. Any liens on the property will be transferred to you as soon as you purchase the home. Which can be a major yikes.
One last thing about the bank: They’re not going to be particularly speedy. You’re not dealing with an individual homeowner, you’re dealing with a company that has a lot of other stuff going on. While, yes, they do want to sell the house, they’re also trying to sell other homes, negotiate loans, and accept daily deposits. Sometimes you might have to wait over a week for a response. And there’s nothing you can really do to speed up the process. Just remind yourself that patience is a virtue and at the end of the process you’ll have a new house.
Tip-Top Shape? Maybe.
The previous homeowner probably tried to save their home. When the bank wasn’t as cooperative as they wanted, the homeowner may have began to have some hard feelings against the bank. The result is often a home in less-than-perfect condition: broken mirrors, spray painted walls, and no light fixtures. While every home isn’t damaged, be conscious of possible damage to the home. You won’t be able to do a final walkthrough, so there will be some issues. Damages are often fairly easy things to fix, but remember that you’ll be the one fixing them. Factor this cost in when making an offer on the house.
There’s No One to Dish Out Details
You won’t be able to talk to the previous homeowner about the home. In fact, you don’t really have anyone to tell you the home’s history. With some digging and a lot of questions, you can find out information about the shape of the home. Try to find copies of previous inspections and previous disclosures. Any information about how the home used to function will give insight into how the home will function after you move in.
Move into a home that you can see yourself making a future in. If it happens to be a foreclosure? Well, we know that handle it.
Looking to Buy a Foreclosure?
TRELORA real estate serves the Colorado Front Range, Summit County and Seattle Metro Area and our mission is simple: full service real estate for a fraction of the cost. When you hire a traditional agent to help you buy or sell your home, man cave or no, you pay that agent 3-6% of the home’s value.
When you hire TRELORA, you pay one flat fee rather than a variable commission on the price of your home. You’ll also get best-in-class customer service. A team of expert agents who close hundreds of deals per year. And a proprietary technology platform that puts you in the driver’s seat and an average refund of $13,500 in Colorado and $18,000 in Seattle.