Foreclosures can represent a great buying opportunity for an informed buyer. However, for an uninformed buyer, foreclosures can be a time and money waster. Before entering into a purchase offer on a foreclosed property, make sure that you understand the process and what can go wrong.
Many AS-IS home sales will not qualify for traditional FHA or VA financing, and depending on the condition of the home, most banks will not make the necessary repairs to meet the minimum financing requirements. If you are not an investor or cash buyer, you will want to avoid getting into contract on a home only to have to start over after you have paid for a home inspection and an appraisal. Alternatively, if you have the cash to pursue an FHA 203K rehab loan, you might be able to buy that ugly duckling in the perfect community and have the home renovated into your dream home. Your Trustworthy agent will help you with this evaluation.
Most contracts in Hampton Roads are written using a standard contract template, that has been carefully written to represent each party fairly. These contracts specify that the Seller will make minimum lender ordered repairs to bring the home up to a financeable condition. They require that the Seller convey a generally warranty, marketable and insurable title, and they require that the seller must "perform" (sell you the home) on the specified settlement day. In a normal sale, if the Seller changes their mind, cannot clear title, or does not wish to make lender ordered repairs, the Buyer may sue the seller to recover damages (home inspection & appraisal fees...) or to perform (close per the terms of the agreement). Because the institution that is selling a foreclosure home is often unfamiliar with the homes condition, or is not fully aware of all of the title issues, they will require that the Buyer sign "Bank Addenda" that creates exceptions to the standard purchase agreement. These exceptions often exempt the bank from making "any" repairs, even if needed for financing. They often exempt the bank from conveying a general warranty or marketable title. More importantly, they often include a provision that allows the institution to withdraw out of the agreement altogether, at the institutions sole discretion, without being liable for any expenses or damages the buyer might have incurred in the process like home inspection and appraisal fees. Your Trustworthy agent will help you evaluate the pro's and con's of purchasing a foreclosure home so that you make an informed decision.
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