Top 7 things to know when buying a foreclosure/REO
1. The seller is a bank and will not respond to offers as quickly as a typical seller would. It usually takes anywhere from a few days to a week for a response to your offer. 2. The sale will be "AS-IS". The seller will not make repairs to the property 99% percent of the time, regardless of how big or small of a repair you want the seller to make.
3. Your offer will be countered. The seller will counter your offer to essentially rewrite the contract in their own words.
4. For what ever reason, if you decide to back out of the transaction you'll need to communicate this in writing to the seller before your contingency period expires. If you do not cancel the agreement within the contingency period and can no longer buy the property, the seller may keep your initial deposit.
5. If you do not close escrow on time, assuming it's not the seller's fault, you'll end up paying a $300+/- penalty, and an additional $150-$300 for every day you are late in closing escrow. The seller may even decide to cancel the transaction and keep your initial deposit.
6. The seller has a limited right to cancel the transaction at any time, and may do so for a number of reasons. Besides the fact that you've probably already invested a great deal of time and emotion into the property, you may have also paid for an appraisal and inspections.
7. Almost all communications between the seller, listing agent, and your agent will be through email. It's really important you're sending the right message as in this case it's not "how you say it, but what you say".
Buying a foreclosure can be an excellent opportunity for investors, first time buyers, and anyone looking to buy real estate slightly below market value and have an opportunity to build sweat equity. If you're planning on buying a foreclosure, read up on it, ask a lot of questions, and constantly "be in the know". Foreclosure sellers will be much less forgiving than happily retired "mom and pop" selling their home and moving to... Palm Springs, and will not flinch when it comes time to take your deposit. But don't let that discourage you, just make sure you and your agent communicate well and you'll be fine.