As we all know, foreclosures are a big part of the current real estate market, and they can offer buyers a great deal….or a disaster.  Here are a few important things to know before sinking your money into a foreclosure.

#1.  The biggest difference between buying a foreclosure and a traditional sale is that the current owner has no knowledge of the property and most likely has never even seen it!  With a traditional sale, the owner is legally bound to disclose anything and everything they know about the property that could impact the functionality or value of the property.  Not so with a foreclosure.

#2.  The second thing to understand is that the property is sold “As Is”.  This could mean anything from the home simply missing a refrigerator or stove to missing all the toilets, floor coverings and windows.   This also includes everything you don’t want, such as any old belongings or outbuildings that were not cleared.

#3.  Now this may sound like, what you see is what you get….but that would be too simple.  You also get what you often can’t see such as termites, bad electrical wiring or a failing roof or rotting pipes.  This is why it is imperative that you spend the money for a general home inspection by a qualified home inspector, and then spend the extra money for additional inspections of any areas that seem to be waving a red flag, such as a roof or plumbing.  Unless otherwise stipulated in the contract, in California you have 17 days after acceptance of your offer to complete your inspections and pull out of the deal with all of your money if you don’t like what you discover.

#4.  I’ve seen this one trip-up would-be buyers too often….make sure that the condition of the property is consistent with what your lender will approve.  For instance, if you are doing an FHA or VA loan, the house has to be habitable; no mold, floor coverings must be in place and appliances and heater must all be in working order.  Talk with your Realtor about the type of loan you are getting and make sure the houses you’re seeing will qualify.

#5.  You will be asked to sign a bank Addendum which basically relieves them of any liability.  A part of the Addendum will cover late closing.  Make sure your loan is in place and ready to close on time.  If there is a late close of escrow and it is the fault of the buyer, it will cost you about $100 a day for each day that you’re late to close escrow.

And finally, make sure you work with a Realtor who is experienced in foreclosures!  There are way too many pitfalls and potential hazards to risk your deal in the hands of an inexperienced agent.

If you have any specific questions, or would like to see foreclosure opportunities in San Diego, please don’t hesitate to give me a call!

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