After 12+ years in the real estate business I have seen and dealt with several foreclosures and actually purchased a few myself. However, The general public should be aware of several things when buying a foreclosed home.
RIGHT OF REDEMPTION: Right of Redemption means the owner who lost the home could actually come back and re-take the property. This redemption period usually last 6 to 12 months. If this happens (rarely) it is likely they original owner would have to pay you back for the property and any NECESSARY repairs. Necessary is a huge word and meaning that new paint, updated hardwood, or inground swimming pool that you just installed might not be covered as necessary. *PLEASE NOTE THAT REDEMPTION LAWS VARY FROM STATE TO STATE AND WE HIGHLY RECOMMEND SEEKING A PROFESSIONAL BEFORE PURCHASE*
NOT ALWAYS A GOOD DEAL: Just because it says “FORECLOSURE” on the listing paperwork doesn’t always mean that it is being sold below value. Most Foreclosures are handled by management companies and these companies often seek professional help when determing a value. Most foreclosures before hitting the market have a BPO done on them. A Brokers Price Opinion (BPO) from a qualified professional is a report stating their recommendation for list price based on current condition. Just because a broker recommends a price doesn’t always mean that the company will use it. In years past we have seen Foreclosures sit on the market 6 months or longer without selling due to high price. It is our recommendation before purchasing any home you seek a professional to help run a comparable report to ensure you are getting a good buy.
LOOKING FOR A QUICK FLIP: NOT SO FAST!!! Some foreclosures place special bidding instructions that prevent investors from placing a big within a certain time frame. (KIND OF REVERSE DISCRIMINATION. IN MY OPINION) Who can bid first? Often they will only allow first time home buyers, government agencies, and non-profits to make a bid for the first bidding period. Each type of foreclosure is handled differently and you should be aware this rules. In my own personal experence I made an offer on a Foreclosure around 2 years ago. When the final contact was ready to be signed I noticed lots of small print on their in-house contract. After reading this I noticed a paragraph stating that the home could NOT be resold for a time period of 6 months. This was a deal killer for me since the property needed very little updates and would have been a quick flip.
THANK YOU for taking the time to read this article. I hope this provided value and can be helpful to anyone looking to buy a foreclosure in the future.
The Dustin Holden Team
Coldwell Banker Elite