Buy a Real Estate

Is purchasing a house at the time of foreclosure similar to buying a house that has already been foreclosed upon?

No. There are two different types of home foreclosures purchases. The first is when the lender actually forecloses on the property. If you’re interested in purchase you can show up in court and bid on the home foreclosure. The second type is when the lender or insurer actually owns the property and is selling it as its rightful owner.

Is the escrow the same as a typical real estate transaction?

No. When you’re buying home foreclosures at the time the lender takes the property back, you must show up in court, bid on the property, and if the bid is accepted, you are obliged to buy the house with a cashiers’ check, without inspections, and without any contingencies. When you’re buying from a lender or insurer after the house is already foreclosed on, there is still the opportunity to negotiate the price and terms, but because of the competitive market, the lender will normally end up calling most of the shots.

Do home foreclosures involve any additional legal concerns or fees?

No. With proper inspection, home foreclosures are unlikely to be accompanied by any additional legal concerns or fees. Bearing that in mind, remember that usually home foreclosures are sold “as is,” and due to the fact that the lender has never occupied the actual house, they are often not aware of the intricacies that may typically be required on a disclosure (for example leaking roofs or problems with electricity).

Does buying a foreclosed house involve any risk?

No. Purchasing a foreclosed home is unlikely to be risky if you do a thorough investigation. Be aware of the two facts: lenders will have limited information to work with for disclosures; secondly, people tend to get excited by the idea of a “sale,” and fail to notice the actual value of house foreclosures because of a “perceived value” issue. Consider the following hint: try to forget that it’s a foreclosure and think of it as a piece of real estate.

Is a foreclosure always an “as is” deal or can I negotiate with the bank for repairs or improvements?

As a buyer you can always try to negotiate, but conditions of the home foreclosures market are more likely to favor the lender, who will in most cases be able to sell the property “as is.”

Purchasing a home involves many issues, such as legal, financial and emotional considerations. Therefore, it is a good idea to spend some time examining the mistakes of others, which should help you avoid disappointment or even finding yourself living in the wrong house. Below you can find some of the most frequent as well as potentially dangerous and cost-consuming mistakes that are made by first time home buyers.

• Running before walking. Once you’ve made the decision to buy a home it is easy to make that mistake. It involves rushing off looking at homes, surfing the web or calling on advertisements instead of making some careful preparations first. If you fail to prepare yourself properly, your purchase can end up in a disaster. I often receive emails from buyers who have signed a contract to buy a house and want to know how to avoid the purchase. Let each and every first time home buyer know it: if you contract to buy a home and simply change your mind, there is almost zero chance of being released from the contract.
• Over-buying the first time. Living a life of a “house poor” person is surely a very uncomfortable experience. Your house may be large and beautiful but with little or no furniture it will still be empty and cold. Situations when almost every penny you earn goes to the support of your house are a frequent cause of family stress. If you push yourself right up to, or possibly beyond, your financial limits will make you highly vulnerable when the changes to the national or your personal economy occur (and believe me, they will appear sooner or later). It is important that you leave yourself some room to breathe!
• Not comparing mortgages. When you decide to take a mortgage remember that there is a great number of variables involved: type of mortgage, term, lender and amount of points to mention a few of them. Therefore, it is essential to explore all of your options. You shouldn’t simply accept the first offer that is presented to you, whether it is from a mortgage broker, an agent or on the recommendation of a friend or relative. Be smart and devote some of your time to comparing. This will allow you to get the most advantageous plan for your requirements and financial situation.
• Recession. Every now and then the country suffers from economic slumps, which are impossible to avoid. The real estate market deploys defense mechanisms such as lowering home prices or providing various incentives such as lower mortgage rates or tax relieves to encourage economic activity. This may lead to a disaster or a deal of your lifetime. Remember, it is all about financial security. If you enjoy a good job stability recession is a good time for you to buy your first home at a very competitive price, without ever been exposed to the thread of foreclosure.

As a person with a lot of experience in insurance I suggest that if you’re a real estate owner you should check your coverage each year in order to find out whether you have enough insurance to rebuild your house and replace your belongings if everything is lost in a fire or other unexpected event. What you should ask yourself is:

• Is the “replacement cost” covered by your policy acceptable taking into consideration the costs of labor and materials in your area? For instance, it’s rather doubtful that many homes in Silicon Valley could be rebuilt for less than $200 a square foot.
• Does your policy involve “extended or modified replacement cost coverage?” This gives you a certain percentage above the policy limit to rebuild your house.
• Does your policy include a “building code endorsement”? It covers the costs of bringing your home up to building safety codes when it is being rebuilt.
• Getting reimbursed for a claim after a fire is easier when you have prepared an inventory of the objects present in your home. There is some free software available that can help to speed up the process.