Friday, June 21, 2013

Should I buy a Foreclosure Directly from the Bank?

Should I buy a Foreclosure Directly from the Bank?

Well that depends on the level of risk you are willing to take.  Tracking properties down to the right bank and servicing company can be difficult as they are not advertised or sometimes you can find them at auction sites.  You need to evaluate how good of a deal you will be getting in exchange for how much risk you are going to take.  When you buy directly from a bank, you automatically assume any liens or encumbrances on the property whether they are recorded or unrecorded, clouds on title, multiple mortgages, unpaid taxes,  HOA dues in arrears, condo fees in arrears, unknown property condition, unknown repairs, and county property code violations and fines.  In addition, you do not know if the foreclosure process was even adequately done in the past.  You cannot inspect the property prior to purchase or back out due to contract contingencies. 

Be Ready for the Risks?

If you are going to consider buying a property like this you have to be emotionally and financially ready to take on any unexpected risk.  A few years ago in the Orlando Sentinel wrote about a couple that purchased a foreclosure, only to learn they inherited $200,000 in back taxes and liens, and they were Orlando Real Estate Agents, not such a great deal after all.  Even some seasoned investors stay away from these deals.  The VP of Realty Trac recommends not to buy foreclosures due to incurred risk.

Can I get a foreclosure with less risks?

If you want more protection, predictability, and clean title then you should consider Bank Owned REO or Real Estate Owned.  The primary advantage of buying these bank foreclosures is the bank has wiped out all the liens, bad debt, paid off back taxes, and other fees, and will sell it to you will a special warranty which gives you some past protection, but not to the extent as a general warranty deed.  Property condition, may not be good, but you have the right to conduct an inspection and evaluate if you want to continue or back out of the transaction.   Most of all you can be assured you are not on the hook for any unexpected financial or legal issues.  

Buyers Broker of Florida has sold hundreds of Bank Owned REO to many happy buyers.  We know how to prepare offers exactly needed for the bank review, and watch the transaction closely to avoid pitfalls and close successfully.  If you are in the market for a bank foreclosure, hurry, because Orlando bank foreclosure inventory is decreasing.