Nolo.com Assesses Risks of Buying Foreclosed Homes

BERKELEY, Calif., May 1 /PRNewswire/ -- When real estate agent Tony Wise
moved into his foreclosed home over 10 years ago, the upstairs bathroom was
missing (a hole was in its place), and the garbage hadn't been taken out in
over a year. Fortunately, Wise was aware of a lot of the house's problems
before he bought it.
(Photo: http://www.newscom.com/cgi-bin/prnh/20080501/AQTH521)
While Wise had initially hoped to win the house through an auction, he was
outbid by a real estate agent. He, however, ended up buying the home from that
agent directly -- a situation that worked to his advantage. Not only could he
obtain financing (not possible in an auction sale), but he could get it
thoroughly inspected before he bought it.
This was 10 years ago and foreclosure circumstances have changed
tremendously since. A lot more homes are in the market and more real estate
agents are playing the field.
However, it is still important to be cautious when looking at foreclosed
properties. A bank or other lender wants to recover as much of its investment
as quickly as possible, so you could get a foreclosed home for 20 percent or
more below its market value. But while that may seem tempting, risks need to
be calculated. Often, money saved on the sale needs to be put back into the
home for renovating. You need to make sure that the price is low enough to
offset the amount required to bring the condition of the home to market
standards. According to Ron Egherman, owner of California real estate company
Marvin Gardens, "With homes where the owners haven't been able to pay the
mortgage, sometimes very little money has been put into maintenance. When
owners are losing their homes, they often stop caring about them."
Buyers are lucky when the deferred maintenance is at least obvious.
Because foreclosed homes are often bought through banks, sometimes little
information is known about the condition of the home leaving the new owner
completely unaware of hidden issues. Many of these homes are not always
available for inspection prior to purchase either, so buying them through an
auction can sometimes be a gamble (if you have your eye on a house prior to
its auction, you can push to look at public records -- this will also help you
find out if there are any unpaid liens on the house). Egherman, however, adds
that a home bought through an agent normally helps in situations like these.
Foreclosed homes tend to exist in clusters and are often prey to minor
theft, adds Steve Elias, President of the Bankruptcy Law Project and author of
Nolo's The New Bankruptcy: Will it Work for You?, and Nolo's upcoming book,
The Foreclosure Survival Guide. He adds, "You'll often find people stealing
the copper pipes and other scraps from these abandoned homes that can be sold
in the market. Because these homes are purchased "as is," there is no
guarantee of condition."
Some homeowners, angry over the foreclosure and reluctant to move out, try
to extend the move-out date as much as possible. Because the responsibility of
removing occupants lies with the new owner, Egherman suggests either buying a
home through an agent or using a lawyer who can help you with the eviction
process and paperwork.
The paperwork involved with buying a foreclosed home is far more than the
work required for a normal home purchase, and a lawyer can be helpful. One
good place to look for a local real estate attorney is Nolo's Lawyer
Directory, which provides profiles of local lawyers (nolo.com).
"You may never know everything, and that's a risk you have to be willing
to take," Egherman adds.
According to USA TODAY, over two million U.S. homeowners are in default on
their mortgages. And with more homes going on the market, one needs to be
armed with as much information as possible before making a purchase. Buying a
foreclosed home can have a happy ending; Wise still lives in the home he
bought 10 years ago and couldn't be happier, but make sure you are prepared
for all the possibilities.
About Nolo
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SOURCE Nolo.com

Andrea Burnett, Publicist, Cell, +1-650-207-0917, andrea@andreaburnett.com,
for Nolo.com