 Buying a foreclosure the safe way
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 Dear
Real Estate Adviser,
Do you recommend buying a foreclosed house as a primary home? I've heard that it's not for the faint of heart. Is it really that bad?
-- Alan F.
 Dear
Alan,
It can be that bad. Or it can be that good. It all depends on how much homework, due diligence and common sense you are willing to employ in the effort. With foreclosures continuing to rise this year and a general flattening -- or even a modest depression -- in values in many markets, there may be no better time than the present to pounce on a good deal.
For novice foreclosure buyers, bank-owned properties are considered the safest bet because there are no liens and no back taxes involved. Most foreclosures end up being taken back by the lender at auction anyway.
What's all this about an auction? Well, I do not recommend that you do the auction buying yourself. In some auctions, buyers may not be afforded the chance to closely inspect the property, yet they will be expected to produce the entire purchase amount that same day. And if there is a tax lien on it, guess who has to pay it off?
Another caveat: Most defaulting homeowners have been
financially strapped for some time and have not been doing anything
but bare-bones maintenance for quite a while, if at all. We hear
stories about auction foreclosure buyers who have shown up at their
new properties only to find the central air conditioning units or
furnaces had been removed or that pipes had burst at some point
and had not been repaired. Talk about faint of heart!
I suspect a barely inhabitable fixer-upper is probably
not what you want for your new homestead, unless you are exceptionally
patient and home-improvement handy. If you're feeling brave, you
could try finding a pre-foreclosure, where you find a homeowner
who's close to going into default who may be willing to settle for
a sum that will at least give back some of the equity he's put in
the house. But in many states, you will have very little time to
close the purchase before default if you proceed this way. And sometimes
the sellers in these instances have nowhere else to go, so you may
be faced with having to evict them. Again, the risks are too many
for the uninitiated.
There are, however, several publications and Web sites,
such as foreclosures.com,
that list both pre-foreclosures and conventional foreclosures if
you're still interested.
But back to the slightly safer purchase from that
lending institution: Sometimes, you can negotiate with banks, who
are often in a hurry to get such a nonperforming asset off their
books and may even let one go at a compelling discount of 20 percent
to 30 percent.
Before you take that plunge, I strongly suggest you
ante up for a home inspection of the foreclosure home. It will tell
you where the major capital trouble spots are and just what you
are getting for your "bargain" price. In any case, you might want
to locate an agent who has significant experience in foreclosure
purchases and can prime you on the pitfalls. With the market like
it is, you may actually fare better and incur fewer headaches by
making lowball offers to conventional sellers, especially motivated
sellers who have had their house on the market for a half-year or
so.
Whatever path you choose, good luck on your journey.
May it be a safe one.
To ask a question of the Real Estate Adviser, go
to the "Ask the Experts"
page and select "buying, selling a home" as the topic.
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