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Buyers beware when it comes to foreclosures!

Colorado Foreclosures

Families looking for a home should not look at foreclosures as a rags riches success story but as a limited opportunity to find a property for their family.In a recent case the buyer found a home that the real estate agent said was bank owned, sold as-is, more commonly referred to as a fixer-upper. It was reasonably priced with little information but it had recently foreclosed. The home was dirty and filled with lots of trash and miscellaneous household products.

In addition to having a proper inspection was difficult because the utilities were all shut off making it close to impossible to determine the actual value of the home.You will find with most foreclosure properties, known as REO’s (real estate owned or pre-foreclosures, also known as short-sales), that they are in complete disarray, have a lot of garbage inside them and are usually in need of many repairs. It’s trickle-down economics, but in reverse. Do you get to inspect a property before you buy it? For some lenders, yes. But it’s usually not part of the contingency section, meaning, if you agree to buy the house, you get it in its current condition, no exchanges or repairs allowed. You get the soiled carpet, busted a/c, vermin infestation, etc. What you get in exchange is a house that is truly under the market as far as pricing is concerned, and you get to add some repairs and sweat-equity to create a potential family financial gain.

While there are state-mandated disclosure laws in most states, you may be waiving those rights in the large bank-owned addendum, which is an as-is monstrosity. It eliminates nearly every protection a buyer has in a Realtor-written pre-printed contract, except that you get your deposit back if for some reason the seller cannot perform on the contract or if the property does not meet your approval after an inspection. Since most REO property representatives take a long time to make a decision on their contracts, time is really not of the essence and you have the time to pour over the contract, addenda and clauses. Our advice at Legacy Real Estate Brokers Inc. is to allow us along with you to carefully review all pertinent documents before a final decision is agreed upon.

The best person to talk to when looking up these type properties is a Legacy Real Estate agent who has walked that path before and can truly point out the issues you need to be aware of before you purchase. Every lender’s contract and property is different so again seek the advice of a real estate professional. Contracts are not written in a manner as Realtor contracts that are more regulated by the real estate commission, so buyer beware.You can try to talk with the bank representatives and listing agents, but many times they are not very helpful and tend to represent the bank’s interests over your specific needs. More then any other type of real estate transaction you need to be properly represented by an agent that has the experience and expertise to handle this intricate purchase.

Tom Reed and Bill Brown are local authors and real estate experts of Legacy Real Estate Brokers Inc. in Denver Colorado. You can visit their website at www.discovercoloradorealestate.com.

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