02 Aug GENERAL ELEMENTS OF BUYING A FORECLOSED HOME
GENERAL ELEMENTS OF BUYING A FORECLOSED HOME
It was not too long ago when a third of all real estate listings in the Twin Cities and metro area were bank-owned foreclosure properties. That has dramatically changed since our values have recovered from those difficult times. Now only a very few homes are REO (Real Estate Owned) foreclosure properties on the market in the Twin Cities. When looking at a REO property there are some important things to consider. First the property has no disclosures and you are buying it “AS IS” which means you take full responsibility for the condition and all repairs. The banks have detailed addendums which you are required to sign that eliminates any responsibility for condition or warranty. So it is essential that you have inspections to protect yourself. These can include…general inspection, sewer inspection, radon inspection, HVAC inspection, etc. Also consider that the bank will most likely do no lender required work orders from the appraisal, and if you are using financing with FHA/VA it might not be a good fit for a property in need of repairs in order to close. Lastly, be aware that the discount in sales price of a foreclosure property could be an illusion, because after the obvious work is completed you might have to spend additional sums on those surprises that will pop up. In determining value for your offer, consider that your time is worth something, repairs always have a habit of costing more than you anticipate, and unseen issues in the future should be figured into your calculation.