This happy family just bought a foreclosure. They are very excited and this home is a perfect fit for them.
It sounds simple enough to “Buy a Foreclosure” and it can be an excellent opportunity to get a home at less than market value. However, and this is a big one, there are a few caveats and very often 1 or more disappointed purchasers.
The process (Coles Notes version):
- View the home and put in an offer to the bank.
- After negotiation and acceptance, do your due diligence and then remove all subjects.
- The bank then applies to the court for a date so that a judge can approve the sale.
- Your offer is made public and anyone else can show up at court with an offer.
- If there are other offers, everyone has the opportunity to present a sealed bid (including you) which will obviously have to be higher than the bid already accepted by the bank.
- All offers presented at court have to be “subject free”.
- The judge then takes the highest offer and everyone else loses out.
For the highest bidder, it’s a happy day and for the others, they may have lost their dream home for $2000 (or less).
Another thing to consider is that the bank takes no responsibility for the condition of the home. NONE. If you move in and the appliances are not there or the light fixtures are all gone, you have no recourse. This is why a foreclosure sells for under market value.
I have been to court representing both buyers and sellers and there are some great deals well under market, some at market and others somewhere in-between. If you can take the stress of not knowing if you will get the home, this may be for you.
My advice: determine what the home is worth to you and develop a negotiating strategy around that.