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risks of buying a forclosure house

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December 08 2013 - Selden
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CAVEAT EMPTOR - Foreclosures can be a tremendous opportunity - but they are NOT for the feint of heart, or anyone who may be "on a schedule" to move.  There are many moving parts to an REO transaction and the different departments in the same lending institution don't always communicate with eachother, and if there is an Asset Manager that is another layer with the potential to mis-communicate, drop the ball, or otherwise delay the transaction.  PLUS - there is always the potential that the bank foreclosed incorrectly and does not actually own the home...this is typically discovered late in the transaction; after the Buyer paid for an inspection, application and title search.  I have personally had the unfortunate experience where I represented the Buyer, and the Seller (a large financial institution with lots of REO properties) had listed the property for sale but they didn't own it.  Another large financial institution had foreclosed on the house and my Client lost $1,000 without any recourse.
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December 09 2013
When it comes to the lending side it can be difficult for some foreclosed homes to pass FHA or VA guidelines, but mostly VA. If you happen to be using a VA loan, these loans have strict inspections that foreclosed homes usually have trouble passing. Either way, I suggest you speak with a lender like myself who would be glad to speak with you to help you get the loan that you need for you new home. If you have any further questions or if you would like a loan, feel free to contact me.

Good Luck!
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December 09 2013
Any time you are buying a bank foreclosure you are opening your self to a higher risk than a normal transaction.  The bank is going to eliminate all liability on the contract of for anyone trying to hold them liable for anything wrong with the house.  I have done foreclosure deals where the home was vacant for a while and when  I showed the home, they had all the appliances in the home, couple days before closing, the appliances were stolen out of the house.  You need to make sure that you have all the appliances in the house that are staying with the home on your non realty item addendum to help protect you from this.  The bank only replaced the dishwasher and the oven cook top, not the refrigerator or the washer and drier.  Also, you need to be aware that the current home owners can come back on the bank and try and sue them for unlawful foreclosure practices and if you close on the home, you will be tied up in that lawsuit, this has happened to one of my clients two days before closing and we had no choice but to back out of the deal because they did not want to get involved with that.
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December 09 2013
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If the original owners are still inside the home, the home is not a foreclosure. It is in the state of "notice of default". This is risky. A foreclosure home has been taken from the original owner and is usually owned by the lender. 
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December 09 2013
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Well we are intrested in a foreclosure house and the house is represented by a agent. Me and my family are in love with the house it is in perfect condition and we are investing literally everything we've saved up and cant afford to make any major repairs.Now the questions is that there are people living over there right now and they seem well educated people I think they are the previous home owners. Will they create any problems for us? and I've heard that when the houses are for closed the homeowner sometimes trashes the whole house before leaving. What can we do to protect ourselfs if something like this arises after we've bought the house?
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December 09 2013
Depends how and from who you buy it. If it is listed official with an agent you may have time to do your due diligence time. If you buy it at the "court house steps" than we are talking about as is with side unseen and no inspection period.

Talk to an attorney as well since you can buy a foreclosure at different stages in the process and make sure you know what you are getting into. 

Foreclosure can be a great buy when you understand the process.

Good luck.
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December 09 2013
1.  You can't go inside it with out breaking the law.

2.  If you don't know what you're doing you may buy the wrong position, rendering your investment worthless when a superior loan forecloses on you!

3.  IRS right of redemption period.  Don't know what this is?  Don't buy a foreclosure!

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December 08 2013
 
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