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Wednesday, March 26, 2014

Buying a Foreclosure - Due Diligence is Required

February 2014 single family foreclosure sales are up almost 32% in Brevard County, Florida over the previous February.  Although foreclosures sometimes offer opportunities to buy for much less foreclosures are not for every buyer.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Foreclosures are generally not move in ready properties.   Many times they have been neglected, stripped of major components (AC, for example) and even vandalized.  Some have been boarded up for a year or more.  Many have had issues neglected for years before the actual foreclosure resulting in further damage (roof leaks, for example.).

A major component of the normal home buying process is disclosure.   In Florida sellers are required to disclose issues they are aware of that affect the property.  Sellers are required to disclose association fees.

But with most foreclosures there are usually no disclosures.   I have seen  many investor owned properties where there is little disclosed because seller "has not lived in the property so has no knowledge."   I personally believe an owner likely has knowledge of repair issues if they have been the landlord for years.

Foreclosure buyers must verify the association fees.  Foreclosure buyers must review the association documents (by laws and financial statements).  Foreclosure buyers must have an inspection done.  Foreclosure buyers should have a survey.

Due diligence takes on additional meaning when dealing with foreclosures as the usual disclosures are usually absent.

As a buyer's agent I do not make the disclosures - only advise.  The seller's real estate agent does not provide the disclosures either.

Lastly, another area of consideration for foreclosure buyers is the closing costs.  While not a significant cost, there are some usual seller costs that institutions will pass along to the buyer including state transfer taxes (in Florida).

Buying a foreclosure requires extra effort by the buyer.

agent@moving2brevard.com


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