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What happened to all of the foreclosures that we used to see & hear about?! Foreclosures are homes that were taken over by the bank because the owners couldn’t make their payments. When I first started in real estate in 2007 & up through the next decade – these were a substantial part of the inventory.
Then, when the housing market shifted, foreclosures became a thing of the past. If a seller got behind on their mortgage, they could easily get out from their mortgage payment by unloading the house to one of the many, many buyers willing to buy almost anything at top dollar.
Well, friends… with so many people competing for housing these last few years, so many buyers paying over asking price – I’m expecting to see foreclosures come back into the mix of our inventory.
With this in mind, I’ve revived an old email template. I would share this to buyers interested in purchasing a home that happened to be a foreclosure. There are differences, & you need to know about these things upfront before you get knee-deep into the process.
NEGOTIATING PRICE
- Negotiating on a foreclosure is very similar to negotiating with a private seller. Many buyers feel that they can get homes for pennies on the dollar. That only works on HGTV shows. You can come in lower without worrying about the offending the seller, because the bank doesn’t have any emotional ties to the property. However, the banks typically price their foreclosures around fair market value. They will absolutely negotiate, but unreasonable offers can definitely expect a counter.
- Cash offers to have more wiggle room. Banks prefer the quick closing of a cash offer, so you will have more negotiating power if you’re not getting a loan.
REPAIRS
- Once you have your inspections or appraisal done, the bank won’t negotiate on doing any repairs. They may negotiate on price, but if you want an issue corrected before settlement, or, if you can’t buy the house because it won’t pass an appraisal – repairs are unlikely to be part of the deal.
DISCLOSURES:
- Because the house is being sold by a company & not a person who has lived at the house, there will not be any information provided on the disclosures. This makes it all the more important for you to get a home inspection by a reputable company. That’s the best & only information you’re going to get when it comes to the structural & mechanical integrity of the house.
PAPERWORK
- There is substantially more paperwork involved when you purchase a foreclosure. The selling bank will sometimes have you sign a completely 2nd contract in addition to the sales agreement provided by your Realtor. This contract supersedes the documents that your Realtor is familiar with. A good Realtor will review the docs & explain them the best they can. However, each bank’s process is different & so are their forms. Make sure that you personally review them carefully as well.
- In my experience, many buyers get too frustrated at the document requirements throughout the transaction. You should know this upfront. Expect to have to sign many forms at many different times leading up to closing.
CLOSING COSTS:
- It’s very common for there to be more closing costs when purchasing a foreclosure. The selling bank pushes as many fees as possible to the buyer’s side. This may include their share of the transfer tax, document fees & may charge extra fees of their own.
- They are very unlikely to pay for a home warranty either. So, if this is coverage you’d like on your new home – the cost for it is going to come out of your pocket.
WITH ALL THAT SAID…
- I don’t deter anyone from purchasing a foreclosure. I just make sure that my buyers are very aware of the differences so we can avoid surprises during the process.
- The process IS different, but my job as a Realtor is not. I always seek to be as thorough as possible in explaining paperwork & strive to make the transition smooth for my buyers.
- I have MANY MANY buyers who have purchased a foreclosure & all went very well, & they love their new home.
Katina Hunter
Team Lead for the Katina Hunter Team with Coldwell Banker
724-888-9020
