Buying a Foreclosure - Easier or Harder?

Many buyers often tell me that they have heard or read that buying a foreclosure is a difficult process. I can only go off my own experience and say that I would not shy away from a foreclosure. I will add that there needs to be a basic understanding of some of the differences in the process.

1. Contract acceptance – When a buyer finds a home and makes an offer, the buying agent will prepare a Purchase and Sale Agreement with all the necessary exhibits. The buyer signs these documents and submits them. If the bank chooses to accept the offer, a verbal acceptance is given. In many cases, the bank will state the binding date be the date of verbal acceptance even though the contract has no seller’s signature. The bank will then send a lengthy contract addendum to be filled out and signed and sent back to the bank. The complete set of documents will now include the original Purchase and Sale, the exhibits and the bank addendum. The bank will then sign the complete set and send them back to the buyer’s agent. This process may take 5-10 days.

2.  Due Diligence – Because the binding date could possibly be the date of the verbal acceptance, scheduling the home inspection and having everything ready to go is very important. I personally don’t like to have my buyer pay for the inspection until I have a signed contract. In many cases, I will have just a few days from the time I get the signed documents, until the 10 day due diligence period is up.

3. Getting it Closed – Another big challenge in closing a foreclosure is that in many cases, the bank needs up to 72 hours to review the final closing package. This requires that the buyer’s lender have mortgage approval and the package submitted to the closing attorney 3-5 days ahead of the closing date.

None of these items are show stoppers, but have to be managed by an experienced agent and a professional lender involved in the deal. I would say for the most part that my experience with closing foreclosures has been good. Don’t get me wrong, there can always be a speed bump that tends to slow a deal down, but speed bumps or issues could arise in traditional sales as well.

Click here to request a free foreclosure list in your area. Good luck and good house hunting.