Buying local foreclosures

in Contributors/Real Estate by

By Will McCullough
Approximately 15 years ago, I found myself standing on a ladder leaned against our first ever “investment property” — a foreclosed brick home in the Burton area. I was absolutely exhausted, having spent the entire day scrubbing every inch of the home’s exterior by hand with a bleach/water mixture to remove the “green stuff” that covered it.
“Why didn’t you just power wash it?” the smirking neighbor standing below me asked. I made up a face-saving answer revolving around how “I wanted to make sure no spots were missed” but the truth was that I’d honestly never heard of power washing. After burying the neighbor’s body in the backyard, Deena and I continued stumbling blindly forward into the world of “learning the hard way” as it related to the local foreclosure market.
That market has changed a bit over the last 15 years, and, for those who are interested (or just extremely bored), what follows are some personal opinions on the topic of purchasing Beaufort area foreclosures as it relates to May 2012.
Good ones go very fast: This is not “Realtor-spin,” this is fact. Many banks are now painting, replacing flooring and making repairs before they list their foreclosed properties for sale in an attempt to make them more sellable. In addition, they are often pricing them very aggressively. Please know that it’s not unusual for us to see well-priced foreclosed properties currently going under contract within a day or two of being listed.
Learn fast. Tour faster: If you are learning about the availability of foreclosed properties via online “third party” sources, you should know that these sites can take a few days to post new listings. I highly recommend that you instead ask a good local Realtor to set up direct notification for you from the MLS. Using this system, you can be automatically notified the minute a new foreclosure that meets your criteria hits the market. If you like what you see, call your agent to schedule a tour ASAP.
Get a pre-qualification in advance: Most banks now require buyers to include proof of their ability to purchase with an initial offer on a foreclosure. Having a pre-qualification letter from your lender on hand (or proof of funds if paying cash) allows you to be ready to move when that “right” property suddenly appears.
Protect yourself: Banks stereotypically offer their foreclosures in “as is” condition and will not normally make repairs on behalf of the buyer. You’ll want to have a period of time to conduct various inspections and, if the results of those inspections are not to your satisfaction, be allowed to “walk away” from the transaction. This topic warrants a detailed column of its own, so please consult with your agent on the best way to ensure this ability when making an offer!
Highest and best: It is currently not unusual in the local market for a bank to receive multiple offers within the same time period for an aggressively priced foreclosure listing. When this happens, the bank will normally notify the various agents that they have received more than one offer and that all buyers need to submit their “highest and best” offer. No, they are probably not lying; they actually have more than one offer. No, they won’t tell us what others have offered. If you find yourself in this situation, consider the highest amount you are comfortable paying and offer exactly that. No more. No less.
Extra paperwork: Don’t be surprised if, a few days after making your initial offer, you receive additional paperwork to sign. Many banks have their own contracts and addendums for a potential foreclosure buyer to execute before an offer will be accepted. Be forewarned that every bank is different and their extra documentation can sometimes negate clauses written in your original offer. I highly recommend that you consider asking a real estate attorney to review bank-provided documents before you execute if it appears to conflict with your original offer’s wording.
Foreclosures offer first time home buyers and seasoned investors alike the opportunity to purchase local property at potentially discounted prices. Please just be sure to do as much homework as possible in advance. If you seek the guidance of a good agent and are patient yet still also ready to move quickly on the right property, it’s a process that can be navigated successfully. And if you ever come across an old brick home in Burton with a lump in the back yard, please disregard it. It’s probably just the septic tank. Good luck!