Top 5 tips for buying a foreclosure or short sale in real estate
Nowadays, it’s likely you’ll come across a short sale or a foreclosure in your home search, no matter the price range. You may be lured by the low price or the terms “motivated seller” or “bank-owned.” It’s true: You can get great deals on bank-owned and short sale properties. But my advice is, as always, to make sure you know exactly what you’re getting.
Here are my top five tips for buying a foreclosure or short sale property, whether it’s in San Francisco, Santa Fe or South Dakota:
1. Get a home inspection. Know what you’re getting. There aren’t always appropriate disclosures in short sales or foreclosures. If possible, get a home inspection before you write an offer, but definitely before you close escrow.
2. Knock on the neighbors’ doors. This is a huge investment and you need to do your due diligence. Your potential neighbors are likely to know something about the house or the neighborhood you don’t. Remember: the seller isn’t there to disclose the crime from last year or the loud music down the block.
3. Review the preliminary title. Make sure there aren’t any past liens or owners still on title. Also, be assured the bank has paid all taxes and delinquencies before you close escrow. In a condominium, make sure there aren’t back homeowner’s association dues. Once you close, those liens, unpaid taxes and delinquencies can become your problem.
4. Go to the local building/planning department. Make sure there aren’t outstanding permits on the house. If it looks like there was a recent renovation, be sure it was done legally and the city has signed off on them. If not, and there’s a problem, the city can cite you. This could result in thousands of dollars in unexpected renovations or “fix it” work.
Also, find out if any neighbors have submitted plans to build a mega house or demolish a house nearby. Any nearby plans or work would normally be known and disclosed by the seller, but not always in the case of a foreclosure or short sale.
5. Know the tenants’ rights. If you’re buying a property occupied by a tenant, you need copies of any leases, knowledge of deposits and length of tenancy. Ask for a tenant “estoppel” or questionnaire from the tenant. Once the property is sold, the tenant becomes your responsibility. You’ll have to adhere to the terms of any outstanding leases. Check your local rent board, because there are some instances where the tenants may have more rights than you think.