If you're on the market to buy a house and going through the search process, you've probably noticed the large number of foreclosures. In May 2013, over 2200 homeowners in Washington went through the initial steps of foreclosure, up 15% from last year. And about half that number of homes reverted to bank ownership, 87% more than in 2012. So it seems like many of your choices in the real estate market will be foreclosed homes.
How is buying a foreclosed home different from a traditional sale?
Well, first it helps to understand what happens in a foreclosure. When a homeowner stops paying his mortgage, the mortgage owner--usually a bank--will serve the homeowner a notice of foreclosure. At this point both parties might opt to try a short sale (which is selling a house for less than the balance owed on the mortgage) as a way to recover costs and, for the owner, a means to avoid the financial stigma of a foreclosure. If however, a short sale is not an option, then the bank puts the house up for auction or pre-foreclosure sale. If there are no bidders, the house reverts to the lender's ownership and is now known as an REO or bank-owned foreclosure.
If the house you are considering is a bank-owned foreclosure, you'll have to take into account that there will be considerable differences in the sale process. Here are some key things to consider:
You'll be dealing with a bank, not a person. Banks aren't in the business of losing money, and they won't be in a big hurry to sell, so they'll be less easy to negotiate with. Typically they will price a house to recover what was due on the mortgage, plus interest and other costs incurred in the foreclosure. There may be more than one decision-maker at the bank, so any offers you place may have to be vetted multiple times before a decision is arrived at. Most banks will make a counter-offer to get a better price.
The house will sell as-is. After a bank reposseses a property, they won't undertake major repairs, and will try to sell the house "as-is". So it's a good idea to get a thorough inspection done, though you'll have to pay for it yourself. If you find that house needs major repairs, you'll need to factor the cost into your offer.
The process may take longer than you expect. Because you're dealing with an entity, and not a person, don't expect a quick response to any questions or even offers that you make. Also, some banks have more streamlined procedures than others. So the process can take a little longer than a traditional sale. The bottom-line: don't suspend your house-hunting while waiting for the bank to get back to you.
If you've set your heart on an bank-owned foreclosure, the extra time and complication buying it entails shouldn't stop you. Get help from an experienced real estate company to guide you through the process. Pacific Northwest Realty Group is a full service real estate brokerage serving Southwest Washington. The right agent makes all the difference. Contact us today. For a list of available bank owned foreclosures visit our foreclosure page.