Birmingham Home Foreclosure Guide

Home Foreclosure Buying Guide 

Many buyers associate buying a foreclosure with getting a steal of a deal. This can be true, but there are also potential pitfalls. The pros and cons of buying a home involved in foreclosure vary with the phase of foreclosure the property is in when purchased. Use this handy guide to figure out what sort of property is best for you!

Missed Payments/Motivated Seller

Advantages:

·       Seller will be motivated to achieve a fast sale, may create opportunity for 

        below market purchase price.

·       Seller may be more likely to do repairs.

·       Seller might be amenable to providing major closing cost credits and other

       concessions.

·       Buyer can use regular mortgage financing.

·       Buyer can obtain desired inspections within standard due diligence /

       contingency period.

·       Seller must legally provide complete history of property's condition,

       problems, repairs, etc.

Disadvantages:

·       Seller may not be able to negotiate price below outstanding balance of

       seller's mortgage(s). In which case, it become a short sale.

·       Sellers still have to move out.

Foreclosure Auction

Advantages:

·       Property will be sold for outstanding mortgage balance owed to foreclosing

       mortgage holder this can be a low price for the property.

·       Cash payment requirements reduce competition.

Disadvantages:

·       Auction purchase price must be paid in cash on the same day as the

       auction, so no mortgage is usually allowed.

·       No inspections allowed; as-is sale.

·       Buyer may take property and owe other liens, back taxes and mortgages.

       Buyer must research state of title prior to auction.

·       Bank cannot provide disclosures as to property history/condition issues.

·       If bank believes auction will not recover a good price, bank may buy the

       property at auction.

·       Property condition might be suspect due to damage done by upset

       homeowners.

·       No commissions or attorney's fees will be paid; buyer must pay for their

       own representation.

Post-Foreclosure Bank-Owned Property (REO)

Advantages:

·       Bank is motivated to get property sold and will negotiate price, down

       payment, closing costs, escrow length, etc.

·       Title will be clear; buyer will not take on any liens, mortgage or back taxes

       of prior owners.

·       Inspections and mortgage financing are allowed within normal due

       diligence/contingency period.

·       House will be vacant.

·       Property will usually be listed on MLS; bank will pay real estate agent's commission.

·       REO sales close within a normal escrow period of time.

Disadvantages:

·       Bank will not agree to do any repairs; as-is sale. Bank will usually require  additional paperwork.

·       Bank cannot provide disclosures as to property history/condition issues.

This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. This is why we hold the Certified Distressed Property Designation and are ready to identify all possible options and, when possible, assist in the quick execution of a foreclosure transaction. If you have questions, please contact us for a free consultation.