Buying a foreclosed home is a highly impersonal experience. 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. They just see it as an asset. For this reason, there are some important questions to ask when buying a foreclosed home. Here are 8 questions we recommend you ask when buying a foreclosed home.
1) Are there any liens on the home?
Foreclosed homes are often a good deal, in terms of price. The bank views the home as an asset. An unwanted asset. 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 transfer to you as soon as you purchase the home. Which can be a major oh no if there’s a lot.
2) How does damage to the home affect the value of the home?
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. Remember, you’re buying the home in an as-is condition. You’ll need to return the home to its former glory. How does this impact the amount you’re willing to pay for the home?
3) Has the home sold in the past five years?
The previous homeowner probably isn’t going to be around to answer any and all of your questions. While we know you’ll do your due diligence, sometimes due diligence doesn’t answer every question. If the home has been on the market recently, the previous seller’s disclosures are floating around somewhere. Ask the buyer’s agent for a copy of the disclosures. While the information isn’t completely up-to-date, it’s better than nothing.
4) Has the home had an inspection recently?
Besides surface-level issues with the home, there might be larger things that you’ll need to deal with. The inspection will reveal anything and everything you should be worried about. But it comes pretty late in the game. Ask the buyer’s agent if you can have a copy of an old inspection. This can give you insight into the history of the home and how much you should offer for the home.
5) How long has the home been unoccupied?
The longer the home has been unoccupied, the more issues you’re likely to have. Make sure to pay specific attention to the plumbing and appliances, these are likely to take the biggest hit with disuse.
6) Are there any other foreclosed homes in the area?
If so, the home you’re interested in will likely drop in value. An area with multiple foreclosed homes is often a mental red flag for potential homeowners — There must be some reason why all of these homes are getting foreclosed, right? If you’re nervous, remind yourself that while the home’s value might dip for a little bit, you’re making this investment for the long-haul. In the long-haul, what about the home and its location matters to you?
7) What’s the neighborhood like?
Is it a community you would like to live in? What is the quality of the school district? How long is the commute? Remember, you’re not just buying the house, you’re buying a new home. Making sure everything works for you.
8) What does your agent think of the home?
While their opinion isn’t the be-all-end-all answer, they do have more experience with foreclosed homes than you do. Figure out how they tell a good foreclosed home from a bad foreclosed home. And then figure out where your potential home falls on the scale.
Need help buying a foreclosed home?
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, 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.