A common question, particularly among investors, in the real estate industry is, “how hard is it to buy a foreclosure”? Unfortunately, the answer isn’t as simple as A or B. There are a number of factors that contribute to the foreclosure process and, therefore, can impact how easy or difficult it can be.
When people ask me, “is it easy to buy a foreclosure”, I remind them of the real estate market crash in 2008-2009. At that time, there was a surplus of foreclosed homes available. RealtyTrac reported that 1 in every 45 homes nationwide were in default during 2009 (CNN). This meant the investors had access to plenty of inventory. However, nowadays, since the foreclosure supply is drying up, there are fewer foreclosure homes hitting the market and an increase in competition. To learn more about the best way to find foreclosures for sale, check out “Best way to find foreclosures for sale: Ask Real Estate Kate”.
Next time you hear someone say, “is it difficult to buy a foreclosure”, remember this, foreclosures are “AS IS” and they typically have a zero inspection period. This means you may have to buy sight unseen. One should try and see the property to the best of their ability prior to bidding. The houses can be vacant or occupied; it just depends. If they are occupied, they can be inhabited by the previous owner themselves, friends, family, tenants, or squatters. If they are vacant, sometimes there is a lockbox. To access a lockbox, one must be, or be accompanied by, a licensed agent/broker. Worst-case scenario there is no interior access available, only exterior.
For those who question, “how easy is it to buy a foreclosure”, be aware, for a person to even able to bid at the county auction, one must be registered. If a person wins a bid, they must pay 5% of the purchase price the same day as the auction. The remaining amount must be paid the following day. Therefore, to bid at the foreclosure auction, one must have large amounts of liquid cash ready to use.
Lastly, when wondering, “is it safe to buy a foreclosure”, please keep in mind, foreclosure titles aren’t always free and clear. There can, and usually are, title encumbrances. One of the most important aspects of buying a foreclosure property is being able to understand title or having someone who specializes in title research. The last thing you want is an unforeseen second mortgage to appear after you win the bid and deposit your money. There are a number of unwanted items that can attach to a title, such as code enforcement issues, liens, and back taxes. Knowing what is named in the foreclosure and what will be wiped out is vital for you success when bidding.