The Painful Process
To close out our 4 part series on buying foreclosed property, we will start with a few basic assumptions:
1. You have a pre-approved loan, meaning that subject to an acceptable appraisal you are financially qualified to buy the property you have an agreed to buy with a fully executed contract.
2. You have an agreed contract in hand.
So now you must (hopefully with professional assistance) travel from contract to close. Let’s start with the pre-approved loan. If you wisely selected an experienced local lender with local underwriting and an in-house appraiser, you have a great chance of avoiding difficulties with the mortgage loan. Even so, with a somewhat shaky mortgage market, and with underwriting guidelines changing almost daily, there could be problems with the mortgage loan that are not your fault, or the fault of your lender. You should be certain of your lenders willingness to communicate with you and your Realtor in a timely way. Most unexpected issues can be resolved if everyone involved is communicating.
You will most likely have a contract without the evidence. The “Banks” are notoriously slow in providing the signed contract to their agent. In most cases, the “Banks” will not provide any of the normal state required disclosures, simply because they do not have to. (The exception is the Lead Based Paint Disclosure, required by Federal mandate.) The “Banks” generally respond to your contract offer with a counter proposal that effectively replaces most of the terms you offer. This counter, and/or sometimes a lengthy amendment, must be carefully reviewed by your agent, and perhaps your attorney. The simple fact is; the final contract will heavily favor the “Bank” with regard to the legal technicalities. Negotiating for an acceptable price is just part of the deal. In most cases, the “Bank is not concerned with the timeliness of their requirements, generally taking the position that since you are getting such a great deal, you will put up with their inconsiderate business approach. So, if you want to close on your contract on a specific day or within a certain time frame, you may want to rethink buying a foreclosure. If time is not an issue, press on. (By the way, you have to be timely in your obligations, even if the “Bank” is not. Fair treatment is not part of the rules.)
If the “Bank” agreed to provide you with title insurance, the insurance commitment and subsequent post-closing insurance policy will be provided by the least expensive title insurance company that can deliver the insurance. That does not mean the policy is no good, but it does mean you should investigate the policy underwriter. And good customer service is not part of the deal. From the “Banks” point of view, they are paying for the policy for your benefit, and they don’t care about any lack of service provided to you. (NOTE: if you do not understand title insurance, it’s time to learn.) If an escrow closing agent will be performing the closing for your prospective property, understand that they are working at a low rate pf compensation based on volume. Customer service and timeliness of action is not their concern.
You should (you are foolish if you do not) obtain an inspection of the property. You may need a variety of sub-inspections based on the primary inspection, and you may want a contractor to estimate the cost of needed repairs. While the “Bank” will seldom (OK-never) make repairs, they will at times negotiate a lower price based on major discoveries, such as a broken furnace. The inspection on a foreclosed property is most useful in providing you with an escape if the property has serious condition issues.
If you are obtaining a loan to purchase the foreclosed property, the lender will require an appraisal. Because values on foreclosed property are usually low to begin with, the appraisal will most likely not be a problem, but there are no guarantees. Appraisers are operating in a very conservative manner in light of the present financial situation.
You should be prepared to wait. Even after the entire process is complete and your lender is ready to close, the “Banks” closing system may not be ready for you. The “Bank” will close as soon as it can, and most likely, not at your convenience.
Be Patient. No one can make the system work any faster, and your emotional frustration, while understandable, will not be helpful to anyone involved.
The “Bank” and all of the “Banks” supporting players are running as fast as they can. They really want to close the contract and exchange the non-performing asset (the property) into cash. In most cases, the entire system is simply overwhelmed with a volume that was never expected. And the “Banks” know that the foreclosed property crises will go away a few short years, so it makes no sense financially to build more infrastructure for a short term problem.
In closing you should consider to always work with experienced and knowledgeable professionals, be patient, and educate yourself. Buying a foreclosed property can be a sound financial decision if you take the time to understand both the property and the system.
Written by Larry D. McGee, Denver Realtor - Visit Website
Sphere: Related Content
Written by Mark Afman - 
Written by Ann Connelly - 
This site brought to you by Larry D. McGee, a licensed Colorado Real Estate Broker
The