Foreclosures for Buyers
Foreclosed properties are owned by the mortgage holder that the previous owner could no longer afford to pay. The former owner is no longer involved with the property or sale thereof. No first-hand knowledge is disclosed about the foreclosed property so no answers can be provided to inquiries about the property. Foreclosed properties are sold ‘as-is.’ A foreclosure is not a short sale, click here for short sale information.
For information on selling a short sale or foreclosure home, click here.
The process of buying a foreclosed property is typically easier and faster than purchasing a Short Sale. It is important to understand that you may be responsible for fees not applicable to you in a typical transaction.
Foreclosed properties are often ‘winterized’ meaning that the electricity, water and utilities are shut off. In order to inspect a winterized property, you must have the listing agent make sure all utilities and water are turned on and the house is ‘operational.’ The bank will often require you, the potential purchaser, to pay for the re-connection of all utilities for the purpose of your home inspection.
In addition to paying the standard purchasers fees, some banks require the potential purchaser pay fees for various items that a seller is typically responsible for including smoke inspections, tax stamps and real estate commissions.
Many foreclosed property descriptions include terms seen below with their meanings.
- ‘As-is’- the property is sold exactly as you see it. The banks do not care if the house has walls. They will not make repairs or negotiate post-inspection.
- ‘No Changes to P&S’- the bank provides a purchase & sale document that you must sign without your attorney being able to make additions or edits. They often require the p&s be executed within 48 hours of receipt along with a 5% deposit.
- ‘No Changes to Corporate Addendums’- many banks require the borrower to sign extensive addendums without your attorney being able to edit those either.
Like an offer on non-foreclosed property, your offer must be accompanied by a $1,000 ‘good faith deposit.’ If the offer is accepted, a 5% deposit is due with the executed Purchase & Sale within 48 hours of acceptance (not the typical buying process.)
You can have the property inspected but the bank will not negotiate post-inspection. If the inspection is unacceptable, you will have the option of withdrawing your offer and getting your deposits back. Should you choose to move forwards after the inspection, you do so assuming any/all necessary repairs.
It is hugely important that you have the best possible attorney representing you on a Foreclosure purchase even though changes to paperwork and contracts are typically not allowed. Your attorney will review any/all documents provided to you as the purchaser. Your attorney will advise you if it is detrimental to continue to pursue the property or if the documents are acceptable to move forwards.
The bank can entertain and accept other offers even after accepting yours. They can change their minds at any time and decide not to sell the property to you. If the bank decides not to sell to you, you will get your deposits back.
The property officially becomes yours after the closing takes place and the new mortgage, deed and applicable documents are on file at the relevant Registry of Deeds.
A foreclosure is not a short sale, click here for short sale information.