Nolo.com Assesses Risks of Buying Foreclosed Homes :

Nolo.com Assesses Risks of Buying Foreclosed Homes

Posted: 07/08/2008 12:00 AM

BERKELEY, CA -- When real estate agent Tony Wise moved into his foreclosed home over 10 years ago, the upstairs bathroom was missing (a hole was in its place), and the garbage hadn't been taken out in over a year. Fortunately, Wise was aware of a lot of the house's problems before he bought it.

(Photo: http://www.newscom.com/cgi-bin/prnh/20080501/AQTH521)

While Wise had initially hoped to win the house through an auction, he was outbid by a real estate agent. He, however, ended up buying the home from that agent directly -- a situation that worked to his advantage. Not only could he obtain financing (not possible in an auction sale), but he could get it thoroughly inspected before he bought it.

This was 10 years ago and foreclosure circumstances have changed tremendously since. A lot more homes are in the market and more real estate agents are playing the field.

However, it is still important to be cautious when looking at foreclosed properties. A bank or other lender wants to recover as much of its investment as quickly as possible, so you could get a foreclosed home for 20 percent or more below its market value. But while that may seem tempting, risks need to be calculated. Often, money saved on the sale needs to be put back into the home for renovating. You need to make sure that the price is low enough to offset the amount required to bring the condition of the home to market standards. According to Ron Egherman, owner of California real estate company Marvin Gardens, "With homes where the owners haven't been able to pay the mortgage, sometimes very little money has been put into maintenance. When owners are losing their homes, they often stop caring about them."

Buyers are lucky when the deferred maintenance is at least obvious. Because foreclosed homes are often bought through banks, sometimes little information is known about the condition of the home leaving the new owner completely unaware of hidden issues. Many of these homes are not always available for inspection prior to purchase either, so buying them through an auction can sometimes be a gamble (if you have your eye on a house prior to its auction, you can push to look at public records -- this will also help you find out if there are any unpaid liens on the house). Egherman, however, adds that a home bought through an agent normally helps in situations like these.

Foreclosed homes tend to exist in clusters and are often prey to minor theft, adds Steve Elias, President of the bankruptcy Law Project and author of Nolo's The New bankruptcy: Will it Work for You?, and Nolo's upcoming book, The Foreclosure Survival Guide. He adds, "You'll often find people stealing the copper pipes and other scraps from these abandoned homes that can be sold in the market. Because these homes are purchased "as is," there is no guarantee of condition."

Some homeowners, angry over the foreclosure and reluctant to move out, try to extend the move-out date as much as possible. Because the responsibility of removing occupants lies with the new owner, Egherman suggests either buying a home through an agent or using a lawyer who can help you with the eviction process and paperwork.

The paperwork involved with buying a foreclosed home is far more than the work required for a normal home purchase, and a lawyer can be helpful. One good place to look for a local real estate attorney is Nolo's Lawyer Directory, which provides profiles of local lawyers (nolo.com).

"You may never know everything, and that's a risk you have to be willing to take," Egherman adds.

According to USA TODAY, over two million U.S. homeowners are in default on their mortgages. And with more homes going on the market, one needs to be armed with as much information as possible before making a purchase. Buying a foreclosed home can have a happy ending; Wise still lives in the home he bought 10 years ago and couldn't be happier, but make sure you are prepared for all the possibilities.

About Nolo

Since 1971, Nolo's goal has been simple: To make America's legal system accessible to everyone. With hundreds of top quality, plain-English legal products, Nolo has helped make that happen. Every year, over 10 million people turn to Nolo to save billions of dollars. Visit http://www.nolo.com/ for more information.

Notes:

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Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20080501/AQTH521
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk, photodesk@prnewswire.com
Source: www.Nolo.com

CONTACT: Andrea Burnett, Publicist, Cell, +1-650-207-0917,
andrea@andreaburnett.com, for www.Nolo.com

Web site: http://www.nolo.com/

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