Articles - Archived Expert Advice

Buying a Foreclosed Property

I’m considering buying a foreclosed property. Are there any extra steps I need to take in getting a loan…and what does it mean if the property is listed as a short sale?

With the recent trend of foreclosures, more consumers are interested in purchasing foreclosed properties. The standard loan procedure will be the same whether the property is in foreclosure or not; however, some lenders may not make loans on foreclosed properties.

One important thing you may want to think about beforehand is using a qualified attorney to perform a title search for existing liens. You can also search public records for this information, but you want to be thorough. If you find there are more liens against the property than its selling price, it may not be a realistic purchase.

Title insurance is an important policy to have, as all liens against the property may not have been filed before you purchased it. This insurance helps cover the costs of dealing with liens from previous owners; however, it does not protect the property from liens or claims filed against you.

One of the safer ways to purchase a foreclosed property is if a financial institution owns it. In this case, they may be putting it on the market as a short sale. A short sale occurs when the original mortgage lender is willing to accept a purchase price less than the outstanding loan balance. When making an offer on a short sale property, it can take a few days—or months—before getting a decision from the lender.

Lastly, consider having a thorough inspection done on the property. In some instances, severe property damage or theft of appliances may have occurred, causing you to invest thousands of dollars. Just remember: Any venture into buying a foreclosed property carries more risk than the standard home buying process. Weigh your pros and cons—and if you need help, call us!