Getting a Good Deal with a Foreclosure is Harder than you Think

Written by Preston John

Friday, 12 September 2008

by PrestonJohn

The typical AS IS addendum will specify that the buyer is not to rely on the seller or seller's agent regarding the condition or safety of the property being sold. This declaration of total ignorance includes all portions of the property and any improvements. It encompasses electrical, heating, sewage, plumbing, the roof, the AC, the foundation, the lot size, the appliances, the soil and even the basic geology of the land the property sits on. But take note that the exclusions aren't limited to the items listed specifically in the document. It will go on further to state that the seller and seller's agent are also not responsible for the compliance of any of the above mentioned items to City, County, State and/or Federal statutes, codes and/or ordinances. If you've never taken the time to read through a full AS IS Addendum before you should take a minute (or an hour depending on the sheer length of the document) to give one a once over. We've only brushed the tip of the iceberg here.

The AS IS addendum is for use when transferring ownership of a foreclosed home. So when you run across one of those fabulous deals on the system showing prices far below the comps because they're bank owned remember that you'll be signing an AS IS addendum as part of the deal. No matter what comes out after that fact, the purchase is final. You are responsible for anything that happens (or is discovered) after you sign.

Everyone has heard the negative stories about home purchases. Some of the stories are crazy, some are common place and others are rare, but true. You just have to remember that when it comes to purchasing a foreclosed property all of the above are covered in the AS IS addendum you sign as part of the contract. It doesn't matter how long the problem was in the making. It doesn't matter who created the problem. It doesn't matter that your inspector overlooked a $40,000 issue that needs immediate attention on move-in day. The sale stands. You signed an AS IS addendum for that foreclosed home purchase.

Maybe you are positive that the seller knew the negative situation you are just discovering about the house now that you've closed and moved in to the property. Maybe you know for a fact that it was the previous owner that did a horrible DIY job hiding termite damage that only made the state of the supporting beams more unstable. Maybe your AC man tells you that the AC was rigged to run even though it was obviously only going to work for a couple months before giving up the ghost. These hidden or "missed" issues don't change the fact that you purchased the home with the AS IS addendum making everything about it including the problems ALL yours no matter who did or didn't know about them prior to the sale.

So, while many see the massive number of foreclosure listings as a gift from above as they attempt to get the most home for their dollar...a large portion of those will change their minds after spending big chunks of time and money repairing, replacing and renovating what industry experts could have told them were heavily used, often abused, unkempt properties that offer far too many negative surprises to hold the value offered by their lower price.

Foreclosed homes can be a smacking good deal, but too many new residents receive a big smack in the face when the costs of making the home livable start to add up. Jonathan Baer, Sales and Marketing Manager of Montalbano Homes, summed up the opportunities presented by foreclosure listings when he said, "You might end up with a great deal on a great property, but the chances are just as good (or better) that you'll end up with a property that was appropriately priced for the condition that it's in." Home buyers looking at foreclosures have to consider that foreclosed homes are often stripped of the "extras" and often some of the necessities before they consider the "good deal" portion of the package.

Not only will buyers of foreclosed homes have to spend their hard earned cash after they've made the purchase, but just closing on a foreclosed home is more difficult due to drawbacks with the financing. Amerifirst's Damon Lines offered several reasons why getting financing on a foreclosed home is more difficult than privately or builder owned homes, "...banks are difficult to work with and not only that, but these homes are almost never in good condition. Banks don't want to finance a property in poor condition. And the FHA's 90 day seasoning period (requiring previous ownership of at least 90 days before new financing can be approved) stops many deals before they get to the closing table."

Knowing all the relevant facts and information makes being pleased with your new purchase more likely. But no matter how much you think you know, foreclosures just have a higher chance of blowing up in your face after you've made the deal. And with a foreclosed home...there's no "after" the deal. the deal is done and there's nothing left to be said. That's what the AS IS addendum was for!

Article Author:

Preston R. John is the C.E.O. of Larry John Wright Builder Advertising and Associate Broker of Larry John Wright Real Estate, Inc. For more information visit Montalbano Homes. Montalbano Homes strives to provide new home buyers with the information they need to make the very best new home purchase. Contact Montalbano Homes for up to date information on new build, residential opportunities.

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