Warning, warning, Warning
Buying a home that is owned by a bank and was obtained thru foreclosure can be a great deal.
It also comes with strings attached and some pitfalls you should know about ahead of time. Laws differ from state to state but most states have similar provisions that have been pushed thru by lenders.
-Disclosures; when an individual sells a home in a conventional way, they are required to disclose any problems they are aware of that the house may have ie, neighborhood problems, structural problems, deficiencies, future development, maintenance issues etc. Sellers and their real estate agents have become pretty conscientious about being honest in these disclosures. These disclosures are commonly made thru a state mandated form, in California it is called a “Transfer Disclosure Statement”. This form prompts the seller to answer pertinent questions about a home and it’s condition. It works pretty well to let a potential buyer know what a seller knows about a house.
Here is the RubThe law makes an exemption for home sales which involve a home that has been obtained thru a foreclosure process.
(most probates and trust sales also enjoy this exemption). The selling bank is not required to fill out this form. Technically they are required to pass on any possibly detrimental information they may have to the future buyer. But most banks play the ostrich game and bury their heads in the sand claiming they do not know anything about the house. By and large, courts enforcing these disclosure requirements have turned a blind eye to this practice. Unfortunately, it is too hard for a typical home buyer to pursue any legal remedies against a bank that has willingly flaunted the laws.
-This is not to say that buying a foreclosure is a bad idea. It does however, emphasize the importance of a buyer doing their due diligence. A thorough home inspection, including a geological, sewers, electrical, roofing, etc is a must in these sales. Forewarned is forearmed. In many cases banks are willing to negotiate on any flaws that a buyer discovers if they consider them legitimate. A buyer just needs to convince that bank that the next buyer to be interested in the house will have the same concerns and make the same requests.
Many of the homes I have sold in the Sherman Oaks California area have undergone this process. Using the correct amount of caution, foreclosed homes can be great deals but they do require particular attention to determining the condition of the house in question. As a realtor who deals with many foreclosure deals I have learned to help guide my clients thru this process to protect them thru these pitfalls with the least amount of trouble.
About Guy Violas
