Be Careful...

BUYERS BEWARE: Buying a foreclosed home can be VERY tempting…..but: one must keep in mind that the entire foreclosure process is or can be very ADVERSARIAL. Someone is losing their home, someone else is buying it….cheap….and as enticing as it may seem, there are five factors that must be kept in mind:

1. The Loan itself: Assuming not a cash buyer, most lenders will only extend themselves if the home is in reasonably good condition. Someone who is about to lose perhaps their primary investment may very well take something in it that can be used elsewhere….even if they shouldn’t. Thus….carpets can be ripped out, appliances removed, toilets/sinks..gone. Guess what happens next? Nothing. No loan.

2. The Auction Process: This is serious stuff for people who themselves don’t know what they’re doing or who rely on others who are no better informed. THE biggest issue is obtaining a clear title. If a thorough search is not done and the home is purchased on the Courthouse steps….and it THEN turns up that there are liens against the property that no one took the time to investigate….that purchase can be all but worthless, depending upon who holds those liens and their amount. These sales are FINAL. Remember SUB-PRIME mortgages anyone??

3. The Inspection: Suppose you do get the loan and shop for the home via a realtor. Make 1000% sure you retain a CERTIFIED HOME INSPECTOR to check that house out BEFORE making your offer. MOLD is a huge issue, which essentially makes a home uninhabitable. And I can assure you….if one is losing their home and losing it “as is”….they’re not about to be too concerned about disclosing that the ceilings are all but falling down from leaks or that the Roof is in desperate need of replacement. VANDALISM is another. Wires behind walls may have been cut or holes cut into pipes. And yes, appliances and cabinets gone.

4. The Title Insurance: Did you know that a former owner has the right, albeit an unlikely one, to get his home back? And if he does and you have no Title Insurance to defeat his claim, that would be a bit of a mess, especially if you have already expended considerable sums of money to repair that home. So-o-o.. make sure you have a policy with a rider attached to cover you for MORE than you paid for the property.

5. The Waiting Game: Don’t jump at the first chance to buy. Should that original owner come back, this must occur within a time frame. Wait at least several months before trying to purchase a foreclosure. All eyes are still and will be for a fairly long time front and center on the foreclosure market. Have everything that needs to be checked out done via a panel of experts….and then take a deep breath and watch the listings carefully. Don’t forget that yes, the foreclosures are tempting….but like anything else in life…you get what you pay for. Be Careful.



Paula S. Solomon