Buyer’s Temperament — and Timetable
Are you a good candidate to buy a foreclosure?
To find out, ask yourself these five questions:
One. Will you be willing to sign the bank’s “As Is” Addendum and various waivers?
That comes with the territory.
Which means . . . you’d better have your arms around the property’s condition.
Depending on how rough it is, the appropriate due diligence could easily include having a licensed contractor — or several of them — assess the property.
Does your schedule — and budget — allow for that?
Two. Are you willing and able to oversee any needed repairs?
If Step #1 is figuring out what needs repairing, Step #2 is actually doing it.
Yes, a versatile handyman — and some sweat equity — can accomplish a lot.
However, especially if there are city-mandated repairs requiring permits, you may be obliged to hire a licensed electrician, plumber, etc.
Three. Is your timetable flexible?
Unlike a conventional sale, foreclosures typically proceed in fits and starts.
The communication with the lender may be good — or it may be terrible.
Instead of 4-8 weeks, such deals can take between two and five(!) months to consummate.
Four. Can you handle the extra hassle (and fees)?
If the building has been winterized, you may be obliged to pay to have the water turned on — and off.
And make your own arrangements to do that.
The latest gambit is for some banks to write into the Purchase Agreement that Buyers pick up the seller’s closing fees. See, “They Can’t Do That!! (Can They??).”
Five. Are you OK with added financial risk (as distinct from “property condition” risk)?
In a usual deal, the Buyer and Seller each have their own closer, whose job it is to update the title, as well as make sure any unpaid claims or liens against the property are identified and satisfied prior to transferring title to the Buyer.
However, a common requirement in many foreclosure deals is that the Buyer use the bank’s closer.
Ask yourself this: if they miss something, what recourse do you think you have?
The bottom line?
Foreclosures can be great deals.
But they come with a caveat . . . and it’s a big one: they’re certainly not without headaches, and not appropriate for Buyers who don’t have the patience, technical skills, and above all, temperament for the drawn-out, often bumpy process.