Hey, we all want a great deal, right? Recently, lots of buyers have been asking me to help them find foreclosures (or their close cousin, short sales, which I'll cover in a later post.) The common perception is that foreclosures are the Filene's Basement of real estate, the section of the market where the really great deals are hiding. But most buyers don't really understand what's involved in a foreclosure purchase, and many aren't necessarily good candidates for delving into this market sector.
Foreclosure buying is the down and dirty, rough and tumble of real estate, more suited to savvy, cash-laden investors than owner-occupiers shopping for that dream home, for a couple of reasons. First, most foreclosures are generally sold "as-is", without the ability to conduct the same due diligence that a buyer might in a more "normal" purchase. When a bank takes over a property, they turn over responsibility for it to an asset manager who's first job is to secure the property. That typically means draining the house (to prevent any freeze damage), having heating systems turned off or disconnected, and sometimes even turning off electric service to the house (to minimize the risk of an electrical fire.) In some areas, they'll even have the windows boarded over with plywood to prevent vandalism or squatting.
Many banks will allow a potential buyer to conduct a home inspection, but if the systems aren't on, the buyer has to pay to have the house de-winterized and systems turned on before the inspection and re-winterized and turned back off afterward, usually the same day. That can cost hundreds of dollars in addition to the cost of the inspection.