Foreclosure Property Buying Disadvantages
Foreclosure Property Buying Disadvantages.
It has always been a very dangerous process to attempt the purchase of foreclosed properties on the courthouse steps without the benefit of someone who has extensive experience overlooking the process as you complete each step. There are tons of
horror stories on the subject of foreclosure home purchasing by the inexperienced buyer. Most routine buyers are discouraged from buying properties at foreclosure, due to the huge outlay of money required to acquisition one of these properties.
In most cases, a certified check in the amount of 10 per cent or more of the sale price is required from the successful bidder and in many cases all bidder must show proof of certified funds prior to being able to bid at all. Usually you have only a short amount of time to pay of the winning bid price.. in most cases you only have 30 to 90 days to come up with the full amount and if you fail to do so, you will lose the 10 per cent that you put up as earnest money when you won the bid. That could be costly if you failed to come up with the money in time.. In some cases, extensions may be authorized, but don’t bet on it.
Always check to be sure how much time you have to come up with the additional money, as in Palm Beach County, Florida the successful bidder must come up with the money by 3:00 pm the day of the auction. If you do not come up with the money, it may be released to the next highest bidder and your deposit money will not be refunded. If the bidding begins at 9:00 am in Florida, that mean you only have 6 hours to come up with the full balance of the money required to close the property, other wise you are risking the loss of your entire deposit that you have put down.
In only some cases are you allowed to inspect the property before making a bid on it. Of course without the ability to inspect the home, you will not be able to assess what may be required to make the property habitable again. As you can see, based on all the restriction it will be very difficult for you to determine what the market value of the home is and will
affect the maximum you will be able to bid. As I said, its a very dangerous game for the unwary. It gets even worse, as when the property is occupied, you might find yourself in an eviction court attempting to get rid of the tenants or the previous owner. These court cost add up quickly especially when you include the lost time that it takes.
A worst case eviction might take several months to accomplish. If you had big plans for the rehab crew to start immediately following closing, you could be in for a big surprise. When delayed by these things, you costs rise and your profits quickly errode. Did you check with the city planning commission about land use and zoning problems, that may exist. You just cannot imagine all the roadblocks that might pop up once you begin to get the property ready for habitability.
Standby if the lender’s representative fails to make a starting bid. It must have some serious problems if the lender is willing to risk a big loss just to get rid of the property. I can tell you from experience that if the lender does not want the property then you are not likely to be too fond of it either. The point I am trying to make here is that failure to
research a property prior to the bid can lead you to far over bid the market value of the property.
Frequently homes are bought for way more than what they are really worth. One of the main things that cause an over bid is something called “auction fever”. This is a tendency to over bid when you are caught up in the heat of the moment. It really is not safe to purchase a property at auction without first having a title company do a quick and dirty title search. This will show up any obvious title problems with properties that might have large leins standing against them. If you are not the successful bidder, then the title search money is just wasted, but it really is worth the loss.
If you are the successful bidder, you are simply taking the position of the owner in regard to the property and any cloudy title problems now become your problems. All of a sudden any taxes, mechanics leins, or mortgage problems become your problems. If the first lien holder is the successful bidder, he might nullify any other outstanding liens and all those lien holders loose out on the deal. If you hold a junior lien, the only way to win is to buy out the senior lien holder and also be the high bidder for the property. That way you will be able to get a clear title.