FIVE THINGS TO LOOK OUT FOR WHEN BUYING A FORECLOSURE

There are still some deals to be had buying foreclosures. Make sure you do your due diligence and you may be able to snag a great deal. I have clients who recently closed on a 3 bedroom, 2 bath home in a nice suburb of St. Paul. The home was on over 1.5 acres of land and it needed work. The previous owners had stripped the home of anything valuable; appliances, copper pipes, pump for the well and more. But they were able to buy the home for under $100,000 and once the work is done they will have a beautiful home worth twice what they paid for it.

Here are some things to look out for if you plan to buy a foreclosure.

1. Response Time. The bank that owns the home sees it as an asset to be sold and that is it. It is not a home where a family had a

life or will be making a life. The bank doesn't care if your lease is ending and you have to move. They don't care if the roof needs replacing and you don't have the money to do that. This is not a traditional seller. They will take as long as they want or as quickly as they want to respond. So be prepared to wait three days to a week to even longer to get a repsonse to your offer.

2.  Disclosure.  The bank that owns the home will have no history of the home, except financial history. They only know about the mortgage and the previous owners. The bank will not know about water in the basement, how old is the roof, additions that have been made, etc. Usually an Asset Company will be handling the management of the home and they only have knowledge of the home from the time that the bank took it over. You will not receive customary disclosures. What you will receive from the bank will be paperwork stating that the bank has no knowledge of the home and is exempt from any responsibility or liability. So make sure you obtain a thorough inspection so you know exactly what you will be getting into. If the furnace is older; have a specialist check it. If you aren't sure about the roof, get a roofer to inspect.

3.  Tons of Paperwork.  Banks will require a lot of paperwork in addition to the usual purchase agreement and finance contingency and inspection contingency. Fannie Mae has a 12-15 page 'Fannie Mae Addendum'. There will be a document stating the the home will be owner occupied, another document stating that you know there are multiple offers (if there are), and more. And usually the bank won't sign any of it until you have signed everything. It can take 1 - 10 days to receive the signed and completed paperwork back from the bank once you have signed. Patience is key when buying a foreclosure.

4.  Utilities.  Depending on the time of year the home will be winterized and the electric and gas may or may not be turned on. You will want to do a thorough inspection so will need the water on and will need the utilities turned on. In most cases you will have to pay to have the water turned on. If the electric and gas are turned off you will have to pay to have that turned on. Be prepared for some out of pocket expenses. Once your inspection is complete the bank will not agree to make any repairs.

5.  Expect the Unexpected.  Last year I sold a townhome which was a foreclosure. The bank asked for a close date of 11/17 and said they would charge $10/day fine if it did not close on time. A few days before 11/17 (buyers were ready to close) the bank informed us they could not close because the past due water bill needed to be paid and they didn't have the check yet from accounting. They refused to pay the water bill out of the proceeds of the sale which is customary. Once they did mail the check to the city for the water it was too late. The city had forwarded the past due amount to the property tax division to file a lien against the home. The check was returned and now two checks had to be issued for the past due water bill and the current water bill. To make a long story short; the closing didn't take place until 1/10 waiting for the checks to come from the bank to pay the water bills. In another transaction the furnace worked during the inspection, then didn't work during the final walkthrough. The bank refused to repair it. Fortunately it was a minor repair and the buyer repaired the furnace. So anything can happen. Don't panic and rely on your agent to communicate any issues and offer resolutions to anything that comes up.

When you buy a foreclosure you are going to need patience, persistance and resiliance. A little of those will help to get you a great deal.