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By now the media has made everyone aware of the large
number of bank-owned properties on the market, many available at rock-bottom
prices. The general public often considers these houses to be bargains. Some
are. Many aren’t.
A buyer considering the purchase of one of these homes
needs to keep in mind that these homes are bank owned because they have been
FORECLOSED upon, and to consider
ALL the ramifications of that situation. In general, homes are foreclosed on
due to financial hardship or mismanagement on the part of the owners.
Usually, the first casualty of this hardship is the maintenance that a home
requires. The exterior is neglected, leaks develop and don’t get repaired,
needed painting gets skipped, and so on. Sometimes the house may be damaged
by owners who consider the house a resented burden hanging over them.
This
sort of damage is more likely to occur in situations where the house was
rented, and the renters suddenly found themselves forced out through no
fault of their own and with no legal recourse.
Assuming that you have found one of those nuggets
amidst the flotsam, you then have to be prepared for the frustrations of
dealing with banks. It is not like dealing with an owner, because your prize
property is merely one of a large number of files being handled by a
faceless, overburdened clerk who gets paid by the hour, can’t make decisions,
and has no particular incentive to get THIS transaction completed.
You will generally have to pay for all inspections. These will often take much longer because the water and power has been
turned off. If the power and heat have been turned off during cold weather,
broken pipes and other damage may be added to the damage caused by the
owner’s neglect. When you have finally completed all
inspections and decide to make an offer, it will often take weeks to get a
decision on your offer.
Most foreclosed properties are sold "as is",thus you
may end up paying for any needed repairs. Many are
sold with no Real Property Disclosure, possibly leaving the buyer
on the hook for major repairs that were not revealed during the
buyer's inspection.
Despite all these difficulties, there truly are some bargains
out there. However, each house must be carefully considered on a case by
case basis. Inspect the home closely, preferably with a professional, and
make an itemized list of all the repairs and inspections required and their
costs. Compare the combined total of these and the offer that you will be
making to the prices of similar homes on the market. Add
to it the additional time and probable frustrations that you
will have to invest compared to a conventional
transaction. Then you will know if
you have struck gold or if it is merely iron pyrite.
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