What are the diffrences in buying a foreclosure home?

3 comments

1. 

   Pobept K on December 27, 2009 at 4:08 am

   really no difference, a foreclosed home is a ‘Forced” sale and a “normal” sale is a voluntary sale.

2. 

   Your Maryland 'Net Realtor on December 28, 2009 at 7:23 am

   You’re going to face more risk if you’re buying a home at a foreclosure auction … mainly because you don’t have the opportunity to visit the home before buying it. You’re literally buying it sight-unseen.

   You normally need to put up a much more substantial deposit (10% of the mortgage balance, usually) verses a 1% or 2% earnest money deposit to buy a home through the MLS listed with Realtors.

   If for some reason you fail to complete the sale after the foreclosure auction, you will absolutely lose your deposit. Buying a foreclosed home at an auction can be risky, but there are benefits if you do it right. You can also check into bank-owned (REO) and foreclosure properties that are being listed with Realtors. Your risks will be much less.

3. 

   Traverse City Agent on December 30, 2009 at 4:30 am

   There are a lot of differences.

   REGULAR HOME-

   1) Seller is easier to negotiate with
   2) Typically required by law to disclose known defects
   3) Purchase agreement subject to inspection and can negotiate if substantial defects are uncovered.
   4) Purchase is subject to being able to get financing
   5) Home purchasers can be flexible with earnest money $ amount
   6) Sellers are typically aware and make the buyer aware of any issues that would disqualify the home from traditional financing.
   7) Sellers typically negotiate with a single buyer at a time. Traditional sellers keep home in good condition whie selling and for showings

   BANK

   1) This is corporate America, may not respond promptly and sometimes not at all
   2) Has little to no idea about defects in the home. Will require that you understand you are buying “as is” and you are the person soley responsible.
   3) You are buying “as is”. You’ll be required to sign a document stating that although you can have inspections done, the property is sold “as is”. The sales price you already agreed to is hard to negotiate away from.
   4) Your offer needs to show that you are financable. You will need a pre-approval letter from your lender.
   5) Banks typically have a minimum of $1,000 in Earnest Money the’ll ask you to deposit. If you can’t buy the property you’ll be losing your deposit.
   6) Often there are issues associated with the condition of the property that make it not financable through a bank. The house does not qualify to a lenders standard
   7) The bank tries to negotiate with multiple buyers as often as possble. This way they can ask for you’re “highest and best” offer. Quite often buyers end up in a bidding war. foreclosure homes typically have deferred maintenance and sometimes damage from previous owner. Typically have to sit vacant for a time period before can be sold by bank and leaves them open to vandalism.