Understanding Foreclosures for Buyers

What is a Foreclosure? It is a property that is now owned by the bank.  It can also be referred to as an "REO Property". These properties have already gone through the legal process of having a sheriffs sale and have gone through the redemption period (up to 6 months).  The bank has cleared all of the legal hurdles so they now own and can sell the home.

Want to know what to expect when trying to buy a foreclosed home? The bank usually has 2 appraisers set a value before putting the house on the market, so normally they try to be realistic on fair market value. Just like a traditional seller you are more likely to get the bank to come down on price if the house has been on the market for a longer period of time. Homes are always sold "as-is."  This means that if you run into a problem after you close on the home you can't go after the bank. The reason for this is that the bank knows nothing about the condition of the home. You can and absolutely should have a home inspection as a condition on purchasing the property. Most banks expect this.  They may or may not be willing to work with you if there are issues on the inspection, but at least you should be prepared and then can make your decision on whether you would still like to proceed on the purchase. If you decide not to, you will be out the cost of the inspection (normally $300-$400), but you will receive your earnest money back as long as you canceled within the agreed upon time frame.

When it comes to hearing back from the bank on an offer, expect it to take up to 3 business days. If a bank counters you on price, don't be surprised if they drop the list price. The bank in general doesn't care whether you get the home or not, they just want to get the most they think they can get, whether it is from you or someone else.

Send Us Your Questions Regarding Foreclosures.