What it takes to buy a Foreclosure

Because I sell REO'S (Real Estate owned homes, or...foreclosures) I get daily calls on not only my listings, but others in the area.  About 8 out of 10 calls is me educating the consumers about what bank owned homes entail.  May do not understand the conditions of these homes and what it takes to purchase them. Consumers see a "deal" on a cheap house.  Here's a brief snapshot of the ins and outs. 

You probably already know a home is a foreclosure after the owner failed to make the mortgage payments and the bank took back the home.  Although there is a lot more detail than that, that's the basic concept. In New York, the foreclosure process takes years.  The length of this depends on so many factors, from the owner fighting to keep the home to legalities in bankruptcy, title, estates, etc.   Many times, the home is vacated long before the foreclosure sale is done.  Because of this there is no one to properly care for the home on a daily basis.  This allows the home to sit closed up, allowing mold growth in many cases, no utilities are on, proper winterization to prevent freeze damage is not done. 

"Why doesn't the lender or bank take care of the home" you ask.  Good question.  The bank can only do so much. Many do have preservation teams monitoring the homes when the foreclosure gets so far; check for lawn care, avoid code issues if possible, check occupancy.  Many times, occupants just...leave.... and do not inform anyone.  I haven't found one home yet where the occupants did a proper winterization on a home before they left, or kindly kept utilities on to preserve the plumbing.  Therefore, by the time their team is allowed entry it's too late, freeze damage has already happened. 

If you’re interested in purchasing a foreclosure, be advised many require good 'ol hard cash to do so, not only to purchase but to make repairs to be livable.  The main reason is financing.  When you need a mortgage to purchase, the lender sends an appraiser, on your dime to appraise the home, not only for value but repairs in many cases.  Lenders are lending you money for a home to live in, presumable the day of closing, so it must be livable.  Therefore, all utilities must be on and working, electric, plumbing working, water on, heat on, furnace working, etc. This is just the tip of the iceberg as some loans require other things such as no chipping or peeling paint, a good roof, no leaks, no mold or water/seepage in basements, etc. 

DISCLAIMER:  This is not ALWAYS the case.  Sometimes we get a diamond in the rough.  Your best bet is to work with a good Real Estate Agent on your side to navigate through all of this.  If cash doesn't work, we have plenty of mortgage lenders we know and trust to assist.