DEL.ICIO.USBuying foreclosures a tricky process not for ‘faint of heart’
Expect repairs, look for clear titles and understand contracts
For the Journal-Constitution
Saturday, February 14, 2009
There was a time when buying a foreclosed house was the sole domain of investors who stood on the courthouse steps and bid on properties. More often than not, they were buying structures that came with no warranties and were in need of expensive repairs.
The economic turndown in the housing market has altered that scenario. No longer is buying a foreclosed house something just investors consider. They’re often easily found through the traditional multiple listing services and can be previewed with an agent just as any other resale property.
LEITA COWART/Special
Realtor Alesia Rapkin (center) shows a foreclosed home to client Mark Katzeff and SunTrust lender Beth Nicoll. Rapkin says the market for foreclosed properties is no longer strictly for investors.
“About a month ago, almost 10 percent of the inventory in the Multiple List Service was foreclosures,” said Alesia Rapkin, an associate broker with Re/Max Greater Atlanta in Grayson. “I’ve always done a fair amount of foreclosure business, but it’s different nowadays. My buyers are looking for foreclosures for themselves, and there are more to choose from. The market isn’t limited just to low-end houses anymore; there are plenty of good ones out there.”
Rapkin recently led a buyer through a bank-owned, 5,000-square-foot home that sold for $559,000 in July 2005. The bank is selling it for $379,000.
“This is a great house, with five bedrooms, four baths and a full basement,” Rapkin said. “The hardwood floors in the keeping room need some refinishing, and it’s got some things that need painting. Some of the fixtures are missing, but it wasn’t awful. There were no ruined carpets or holes in the wall.”
Rapkin gets so many inquiries about foreclosures that she’s organized a free, two-hour informational session on the topic. At 11 a.m. on Feb. 21, she’ll meet with buyers to explain the particulars of buying a foreclosed property.
The key concept of the session is to explore the significant differences between buying an owner-occupied residence and a foreclosed one, starting with knowing what you’re buying.
“A foreclosed property is as-is, warts and all,” Rapkin said. “So the first thing you need to know is that it’s going to need work. If an owner couldn’t pay the mortgage, chances are good they didn’t keep up with repairs, either. Since you’ll need some money to cover repairs, you really shouldn’t buy a foreclosure at the outside edge of what you’re qualified to borrow. It may not be such a good deal for a first-timer who doesn’t have that much money lying around.”
Most banks will give prospective buyers several days to line up an inspection and to complete a careful examination of the property. “That’s a warning that you’ve got to do your own due diligence,” Rapkin said. “It’s really important to get an inspector to go through the place with a fine-toothed comb.”
Rapkin also points out that the language of the sales contract for a foreclosed home is complicated. “There are pages and pages attached to the transaction,” she said. “The last foreclosure I sold had 26 pages of addendums. You really need someone who can decipher all that.”
Foreclosure buyers need to be aware that if they’re getting a warranty deed, it’s usually only for the period that the bank has owned the house. “And each bank is different,” Rapkin said. “You have to read through it, understand it and know you can live with it.”
When it comes to dealing with the banks that own the foreclosed properties, don’t get your expectations up. “The process is completely different because there’s no negotiating,” Rapkin said. “You can’t go in with a lot of stipulations.”
Rapkin focuses on moving foreclosed homes to which the bank owns clear title. That’s an important factor for buyers who don’t want any surprises after they close.
“If we know that the bank has taken back the title, there are no issues,” Rapkin said. “The properties you buy on the courthouse steps require that you do your own title work. There could be a mechanic’s lien or other unpaid debt against the house that you don’t know about. It’s not a process that’s for the faint of heart, and I’d never recommend that for the lay or first-time buyer. But properties with clear titles are different.”
Those looking for more information can sign up for the Feb. 21 session by calling 404-281-2583. The exact location will be determined by the location of the participants, Rapkin said.
“There are 11 Re/Max Greater Atlanta offices around the city, so when we see who signs up, we’ll pick a central office.”