How to Avoid Foreclosure Purchase Pitfalls
One way to save big when buying real estate is to find a foreclosed property in your target area. Unfortunately, when it comes to foreclosures, what you don’t know could potentially hurt your pocketbook.
Learn how to save money and find the best foreclosure deals by avoiding these common pitfalls.
Most foreclosures are sold on an “as-is” basis, so it is important to have a comprehensive inspection performed. Although the lender is obligated to notify prospective buyers of known defects, it isn’t unusual to encounter unknown problems after closing. Protect yourself by having a thorough inspection performed on all major systems including the electrical, plumbing, pest, water quality and HVAC, as well as the structural integrity.
Code and Zoning Violations
Verify that all work performed on a foreclosed property had proper permits in place; not only will it reduce the risk of expensive repairs or building code modifications, but it ensure that the home meets minimum safety standards.
Taxes and Insurance
Don’t assume that you will automatically save a bundle on property taxes when purchasing a foreclosed home; remember, property taxes are typically based upon prior sales data, so they lag behind what is taking place in the market as a whole. Also, buyers are typically required to petition for homestead exemption and a variance or adjustment which can take time. It’s also wise to obtain at least three insurance quotes prior to placing an offer for a foreclosed property; prior claims that show up on the C.L.U.E. report may increase insurance rates for years to come.
Purchase Title Insurance
Sloppy lending standards and improper paperwork have resulted in a wide variety of irregularities in recording and transfers. Remember, there are two types of title insurance available; purchase both to stay on the safe side and avoid unpleasant surprises in the future.