foreclosure listing truths you need to know

A foreclosure listing may not be a bargain after all.

For starters, foreclosure listings are not a bargain, because banks do not just give properties away. Not even in South Florida, despite the enticing ads about “amazing deals for homes under $50,000!”. In reality, banks try to price a foreclosure property fairly. Meaning, the property’s advertised value is its true appraised value. The only exceptions banks make are for problem properties, which buyers are just not interested in.

But there is a flip side to this. With foreclosure listing pricing at little or no discount to market value, sellers have a huge opportunity. Sellers can easily attract potential buyers with “move-in ready” and at little or no premium to foreclosure properties. Think about it, who would want to invest in a problem-ridden bank-owned property, when there are rent-ready options available?

Closing a foreclosure listing can take a long time.

Contrary to what you may think, that a bank would be in a hurry to dispose of a non-performing asset, the opposite holds truer. Unlike agents, banks are slow, because they do not follow your time frame. They can take weeks instead of days to respond to offers and counter offers. Answers to questions can take forever since banks have to follow many procedures and obtain various levels of approvals.

Often the main reason foreclosure listing deals take a bit longer is because of the additional step of the seller needing bank approval. In short, you have to complete the entire process of listing and selling your property and wait for bank approval. Once the inspection period is over and a deal is in place, the seller has to reach out to the bank for their approval. And this is where you have to sit out days or even weeks, waiting on the bank.

You could also be dealing with a home that has been foreclosed upon and is going to be auctioned off. Meaning, you now have to wait however long the lender decides that process should take! Since the sale is subject to approval, you could have to wait for the sellers to decide. Do they want to get out of the sale, or if they are or can they fund the transaction?

A foreclosure listing may not disclose defects.

Firstly, the disclosure obligations imposed on sellers of foreclosed homes are different from owner-occupied properties. Under Florida case law, sellers can only be liable for failure to disclose a material defect of which they were not factually or constructively aware. So, it is fair to assume that sellers will try to exploit the loophole by asserting a lack of actual knowledge in their defense. Buyers of foreclosed homes must exercise abundant caution and perform an independent due diligence survey of the physical property. The property inspection must include all aspects of the structure, to uncover any material defects before closing. Buyers can then compare an unknown quantity with a full disclosure and condition report.

Banks will disclose nothing about the condition of the foreclosure home, as they would likely not know the problems anyway. Most state laws exempt them from disclosure responsibility. So when you buy a bank-owned home, you’re buying a property with unknown factors and very little to fall back on. Banks do not usually repair foreclosed homes in their portfolios. They won’t conduct pest inspections or provide a roof certification. If your home inspection reveals a major problem, the bank will most likely ignore your request for repairs. That’s just how things work, with bank-owned properties.

Foreclosure listed property repairs can be scary.

Typically, when you buy a home, you can always ask the owners to share the details about the property’s history. In addition to defects, a home inspection may reveal, you can also establish important facts, such as if the roof was replaced. You can get details about problems with water leaks, blockages, and even serious issues like the foundations. However, when you buy a bank-owned property, you’re on your own

Firstly, banks are not too keen on performing any pre-closing repairs, offering the property “as is.” The buyers will have to conduct a detailed inspection. And depending on the age and the condition of the property, it is quite likely that the list of repairs will be extensive. The buyer’s lender will likely want some or all of the problems corrected before closing. This may well leave buyers in a dilemma, and they could walk away from the sale.

The smart seller will have done their own pre-listing inspection and corrective action repairs. They will be offering the alternative of a move-in ready home, with proof of all repairs they’ve done to bring it to that condition.

Other foreclosure-listed home issues.

Besides the bank, foreclosure homes usually come with other issues too. if the property has been vacant for some time, it may have attracted unwelcome residents. The previous owner may have ignored the eviction notice, or just returned to the property again, for free accommodation. The escrow company handling a Pembroke Pines transaction may be located in Orlando, Florida, with the distance adding to the closing delays. And banks charge for closing delays. Then there are fees for lawyers, home inspection companies, and property repairs to consider, on top.

How we can help?

We have over 35 years of experience that can help you navigate foreclosure home transactions successfully and safely. Our associate real estate law firms can review contracts, and provide legal services for securing your transaction. Our experts will guide you through the entire process, and provide the legal documents to protect your rights and liability. Look no further than Real Property Management Premier.

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