It’s the buzz word we hear but don’t quite understand….foreclosure. It sounds like it should be as profitable as a Jack Nicholson movie. If they’re so great, why are we all so cautious? Simple. The bank has repossessed someones home and that creates a natural reaction in us….is it wariness?
Foreclosures will be with us for the next few years so we better get to know the ins n’ outs. Some are pretty good deals. With more information we can get over the “cracks in the sidewalk” and walk comfortably towards a relationship with a new home.
First, some basics.
When a borrower misses as few as two payments the lender is allowed to begin the foreclosure process. A notice is posted on the front door stating the home will be sold by a trustee in 90 days. The homeowner has plenty of options but if none are taken, the property is auctioned on the courthouse steps. If the value is less than the lien, the bank “takes” the house in lieu of payment. Now the lender is the owner. It’s their responsibility to maintain the property and they really hate that.
Consequently, they hire an agent to sell the home. Once it hits the market it’s like any other listing except the name of the owner isn’t “Melvin Udall” but some lending institution. What’s different is what it looks like and the what is required by the seller.
Here is where the wariness returns. The bank will not provide a disclosure statement better known as form 17. They also have no knowledge of the history of the home and make sure you understand that THEY HAVE NO LIABILITY.
The pressure is all on you and your inspector to find problems. To make matters worse, the bank will not make repairs. There will be no work orders. They sell the home where-is, as-is. The seller also creates separate purchase documents which overrule our MLS contract forms. The slant protects the seller from liability. The buyer takes all responsibility.
I’ve read these documents and they require a leap of faith. They’re not evil, just different and you should be wary….just like when having lunch with the odd writer portrayed by “Jack.” The home is different too. It’s rarely in good shape. Damage is often found and appliances are often not found. Heat has been off creating a smell that goes beyond the carpets. Paint, pipes, gutters, roofs and yards have not been maintained. Pets like Verdell the dog might have caused deep damage in the floors. No one has listened for unwelcome noises in the attic or crawlspace on cold winter nights. It’s mandatory to look hard at what’s being sold. You will inherit current defects and any that crop-up after closing.
There are two old sayings, “You get what you pay for” and “If it looks too good to be true….” With a foreclosure both might apply. It takes a sharp buyer, agent and inspector to determine if the deal is truly “As Good As It Gets.”
Short Sale….the term sends shivers up my spine. I have memories of transactions that were ANYTHING but short. One contract took nine months to close; another took six. The experience can ruin your day let alone half a year. There’s a lot of weaving one must do to escape the land mines littering the path. Before my blood pressure reaches DEFCON 3, let me give you some background.
As soon as you begin a conversation about any sort of a real estate topic with an agent you have started on a journey that the Broker takes very seriously. Whether you want to know my opinion on the direction of the economy, what I think of a certain neighborhood or even if I know of any good deals I must pass on the information with skill and care, to the best of my ability because we’ve formed a special bond. You don’t know it yet, but I do.