buying foreclosed homes (Northampton: bank owned, for sale, real estate)

[Maggie08]

I am a young professional who was initially thinking of renting a place in Northampton. But I keep seeing the ads on Craigs's list about floreclosed homes. The deals seem too good to be true, what are the downsides?
What do I need to be aware of?

Also, I think this may be bec I have never owned a home and don't know too much about owning a home, I don't feel quite right buying a foreclosed home, as if i'm taking advantage of someone's misfortune.
What would happen to these home if no one buys?
Would my buying a foreclosed home adversely affect the owner in any way?

I'm very confused.

thanks,
Maggie

[Valerie C]

Hi Maggie
You're correct in being cautious when it comes to foreclosure property. On the surface, it would appear that you can buy at bargain prices. However, dealing with bank owned property can be considered risky.

First and most importantly, you would want to have a Buyer's Agent to work for you on your behalf. You can be sure that the banks have plenty of professional representation, and you should as well. Your agent's compensation is already calculated into the asking price, and if you chose not to have one, it's more money to the Seller's Agent, not to the bank, and not to you. A Buyer's Agent can advise you on strategy, home inspections, negotiation, etc.

Bank-owned property is generally sold as is-as seen. There is no representation given on the property--what you see is what you get, so a good and thorough home inspection is vital. The banks will usually state that no repairs will be made. For example, many people abandoned their homes before winter months. The electricity is usually cut due to non-payment, so with the power off, it was only a matter of time before cold weather moved in, pipes froze & broke, sometimes within walls. Once the bank takes possession, they will usually winterize (but not repair) a house to prevent this type of damage.

A very thorough title search is also important. Along with the house, you can be buying things like liens on the property, which you would be responsible to pay. Your agent should make sure that there is language in the contract to ensure that you have the time and opportunity to become aware of this, and either move forward or not.

Your concern for the previous owner is kind, but unfortunately, that door has closed for these people, and generally their first right of redemption has been unsuccessful. The house will sit vacant until somebody buys it, as the bank is not in the business of renting out property.

Buying a foreclosed property has no effect on the previous owner. Only if you buy a "short-sale" (where the bank will accept a payoff of less than what they are owed) does that affect the owner, and it actually helps the owner to keep their credit intact. A short sale is truly "hurry up and wait" for all concerned, because the bank can take weeks to approve, and months to close.

Be careful with the foreclosures--sometimes they are not quite what they seem, but there is an opportunity to find a good home at a bargain price. I hope this information helps you

[CaseyB]

I don't know what kind of ads that you have been seeing, but the other way to buy these properties is at the forclosure auction itself - that's a whole lot trickier. You would be bidding against the bank who owns the mortgage, plus any other interested buyers. In many cases, you will not be able to gain access to the house because the owners have not vacated. You will have to bring a certified check before you are allowed to bid, and it is up to you to check ahead of time as to whether there are outstanding property taxes or liens. The bank or mortgage co. will bid the amount of the mortgage plus expenses, they don't want to own the property. I'd be sure and be pre-qualified for a mortgage in case they want a quick closing.

As far as affecting the owner, in most cases, no. If there are no bids, the bank will own the property and the owners will be out anyway., The only way you could adversely affect the owners is a situation like some close friends of ours were involved in. Their son and his wife (young and stupid) bought a house, spent all kinds of money on "toys", decide to have a baby and get themselves in all kinds of financial trouble. Our friends ended up buying the house back at the forclosure auction and they hold the mortgage so their son's family can stay there. This would have been more difficult if there had been other bidders involved. As it was, they were able to get a really good deal on the house.

The first house that my husband and I bought was a forclosure that the bank owned. In our case though, the house had been repaired by the bank prior to it's going up for sale.

Make sure you get a good real estate attorney at any rate.

[Maggie08]

Thank you so much to Valerie and Casey both for helpful comments.
Valerie, how do I get a buyer's agent?
That seems less complicated that going through an auction.

thanks.

[Valerie C]

Auctions aren't for the faint of heart, but yes sometimes you can get a deal but as CaseyB says, you are competing against the bank as well as other interested parties. If the lowest bid from buyers doesn't meet the banks reserve price, they will make the "winning bid" and keep the property on their books, and eventually it will be listed in MLS with an agency.

IF you were to ever go this route--I would recommend using the services of a Title Company and not doing the search on your own. The couple hundred that you spend is well worth their expertise in searching through the records, IMO.

And Maggie, a Buyer's Agent is simply a real estate agent (hopefully a Realtor) that you have hired to work for you, and have signed a contract with. This contract can be of any duration that you wish (I recommend a week or two in duration, until you feel comfortable that you and this person work well together). Don't get locked into a 6-month contract right off the bat!

A Buyer's Agent represents the interests of the Buyer and not the Seller. For that reason, you wouldn't want to contact the name on the sign of the house for sale.