The Shocking Truth About Buying a Foreclosure Home. My Top Tips to Save You Time and Money.

You know, if the property is, let's say, $50,000 below market, but you've got to spend $100,000 to bring it up to living condition, is it really a deal? With fall approaching, home shoppers will see more options this buying season as housing inventory hits the highest level since May of 2020. The question is, will people actually go out and buy? And while we have more inventory, prices are still very high, and so are mortgage rates. And while there is some good news as year-over-year price increases have slowed, it's doubtful that we will return to pre-pandemic prices. And with all those prices being so high, many cash-strapped buyers will be looking for deals. And a lot of them will be looking for deals like foreclosure deals. These are homes that banks actually own, and these are still hard to find. That's right. In 2010, following the 2008 crisis, there were more than 2.8 million foreclosures on the market. This year, there's only 358,000. 2.8 million to 350,000. That's a big difference. And that's largely due to government assistance. Maybe you've seen my video on it. There's a program, the Homeowner Assistance Fund. It's actually a COVID program that the government's still squeezing to keep people in their homes, artificially propping up the market. But these programs are scheduled to expire in 2026. And when that happens, since they've kicked the can down the road, for so long, I expect things to change when it comes to the foreclosure market. You know, people often pursue foreclosures because they're priced well below the market. And there's a reason for that. Now, in the meantime, if you actually plan on buying a foreclosure, I'd like to give you a word of warning. It does come with a price. So let me break down the risks involved in buying a foreclosure. First thing when you buy a foreclosure, there are no disclosures. Banks aren't required to provide you any type of disclosure. And they took the property technically by force. So they have no history on the property. So you're not going to be able to speak to a seller to get any information about that house. There is no history on the property. You won't know if they had a previous leaky roof or underneath the cabinets or anything like that. As a matter of fact, I'm at a home inspection right now. And you'll be meeting a home inspector. If you buy a foreclosure, you definitely want to have a home inspected thoroughly. Additional closing costs. You know, when you buy a regular resale from a seller, quite often, you know, you can negotiate certain closing costs. You know, you can split them depending on the state that you're in. Well, that will not be the case. When you purchase a foreclosure, you are going to be saddled with paying all those closing costs yourself. As a matter of fact, you could even be saddled with paying back HOA fees, back condo fees, and potentially back taxes. Not always, but sometimes. You see, banks don't send an estoppel over to the HOA prior to listing the property. And they will be late payments, interest, and attorney's fees that will have accumulated when you pick up a foreclosed property that is in a planned unit development. So buyer beware. When you buy a foreclosure, you're not getting a warranty deed. You're getting a special warranty deed. And there is a difference. A special warranty deed only covers title defects that happened during the time that the bank owned the properties. It doesn't cover anything prior to the bank owning the properties. And that could be a big problem for you. A warranty deed covers you for all title defects, both past and present. So with a regular warranty deed, you're ensuring that you're getting clear title. When buying a foreclosure, quite often you could have financing difficulties. Because a lot of times these foreclosures, you know, they have deferred maintenance. They may be extremely distressed. And in that case, a lot of banks aren't willing to finance you. Conventional financing, they're going to want the property to be in good condition. So you may be forced to get like a rehab or construction loan instead, which is more difficult and has more closing cost, requires several appraisals, what the property is worth at time of purchase, what the property is going to be worth once it's rehabbed. There is a lot more to a rehab loan. And yes, the costs are higher. It's extremely important that you work with a realtor that has experience in dealing with foreclosures. You don't want to use an agent that has not gone through this process before. And having a realtor that has experience with selling foreclosures, they will more than likely be able to fairly assess additional repairs that you may have. And I always tell people, you know, if the property is, let's say $50,000 below market, but you've got to spend $100,000 to bring it up to living condition. Is it really a deal? I can't stress enough how important it is to do a thorough inspection of a foreclosed property. And here's another thing. A lot of times the utilities aren't on and the bank will not turn them on for you. So you will, at your expense, have to turn on all the utilities and pay any deposits necessary. That's also another snag when buying a foreclosure. So this was a quick little video on foreclosures. I like to work smart. You know, well, I'm at a home inspection myself, so I figured I'd knock it out. I will put that video at the end in reference to the foreclosure assistance help that the government is providing, and you should watch it. If you got anything out of this video, make sure to give it a thumbs up, subscribe if you haven't already done so, and I hope I see you here again soon. Take care.