Myths about buying foreclosures

Now more than ever it is hard to look for a home in any area or price point and not come across a foreclosure. These REO (real estate owned) properties are everywhere and ready to be purchased. Just like any other type of home for sale, some of them are over priced, some of them are deals, and others are steals! However, as more owner-occupants purchase these homes some of the myths surrounding them are beginning to wane. Here are the myths I hear the most frequently:

Banks don’t pay closing costs
Only when you are paying cash will you run into a bank that may be unwilling to pay any of your closing costs. But if you’re paying cash $500-$1,700 is chump change right! Banks will pay up to 3% towards a buyers closing costs and some Fannie Mae properties will contribute up to 6% on FHA loans.

Banks don’t do repairs
Foreclosures are sold “AS-IS.” Banks usually will not do any repairs that are the result of a home inspection. However, banks may consider repairs that are required by your lender such as FHA repairs. Banks will do these because they know that any buyer that is interested will need these repairs done because their lender will require them. You may even be able to get a bank to do a termite treatment if active termite infestation is discovered by the inspector or appraiser.

Banks won’t pay for home warranties
Untrue! Banks will usually pay up to $500 for a home warranty. Just because it says no warranties doesn’t mean you can’t get an after-market warranty.
Properties are sold with no EXISTING warranties on what is currently in the property.

All foreclosures are run-down and need repairs
All foreclosures are not alike! You do have more that need cosmetic work at the minimum, however, it is not uncommon to find an REO property that was well maintained. Some lenders now spruce up the property before listing it, installing new carpet, flooring, paint, and light fixtures to command a higher asking price.

Investors get the best deals
Cash buyers will always get the best deals because the though of closing in 4-7 days versus 30-45 days is appealing to any seller–bank or human. However, some foreclosures (like HUD homes) require a 2-week period where owner-occupants are given the opportunity to vie for the property. If no acceptable bids are submitted the seller will then review the investor offers. This is why it’s important to run the numbers and know the value and not low-ball with unrealistic offers.

You can always contact me directly for more information.