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Buying A Foreclosure

By Elizabeth Elstien

With so many foreclosure (also known as real-estate owned) properties on the market, it's wise not to rule them out when searching for homes. Foreclosure properties are owned by the bank/lender, close much faster than short sales and can often be purchased at a fair price, but not necessarily at a bargain price. Lenders are still trying to get as much money as possible out of the home to cover their losses and often have a minimum amount they will accept. Follow the questions and answers to get the inside scoop on buying foreclosures.

Are all foreclosures the same?

No. Know that VA- or FHA-backed foreclosures follow different rules than conventional loan foreclosures. These government foreclosures use registered government brokers and are listed with a real estate agent who can perform government foreclosure sales.

What if someone still lives in the home?

Some lenders will still put the home on the market and others will wait. If the home is a rental with tenants still in it, the lease must be honored, but the tenant has at least 90 days to move out. A foreclosure purchased with tenants living in it still must abide by the lease regarding utilities paid by owner and security deposit return. Lenders may offer a cash-for-keys incentive to get the homeowners out of the home faster. It just depends on the lender. In Connecticut, the new homeowner must wait 90 days before proceeding with legal action to evict the former owner.

Can I get a loan for a foreclosure?

Yes. It is possible to get a loan for a foreclosure property from certain lenders. Do your research before searching for properties and get pre-approved to be able to move quickly once an offer is made. Bank-owned property lenders want a quick sale once an offer is made and are not prepared to wait. Proving you can close quickly means a lender is more likely to approve your offer.

Will I be able to get a home inspection?

Yes. However, banks sell foreclosure homes "as is" so the home inspection is done to inform the prospective homeowner if anything serious is wrong with the home rather than as a price negotiating tool. Use it to decide if you want to proceed with the sale or back out based on the terms of the purchase contract.

How do I make an offer?

If you have a real estate agent, see if they are able to make an offer on the property you are interested in. Otherwise, go to the foreclosure property listing agent to make an offer, especially if a government foreclosure. Some properties are offered at auction. You must place a written bid on the auctioned home. The winning bid must pay the amount of the purchase price by cashier's check without a chance to perform a home inspection or title check.

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