In today's market we are seeing alot of Foreclosures, As-Is 'fixers' and our customers may think this is a great way to purchase a home. In some cases, it can be. However there are things to be aware of when venturing into this territory. Most buyers today are buying homes with mortgage loans which have stricter guidelines than ever before. When purchasing a foreclosure or fixer upper, the bank/owner will often request that the buyer pay for all of their own due diligence inspections, and that no repairs will be made on the property if discoveries are made due to these inspections. There are problems with this part of the process which often do not come to light until the buyer is well into the purchasing process. Lisa Cummings, of Cummings Financial advises this: "There are many homes on the market that seem like great deals due to foreclosure or other adverse situations the seller may be facing. Many times when a property owner faces "tough" times, maintenance and repairs on the home are stopped, and these homes are not always in perfect condition. When you are considering buying one of these homes, your inspection of the property is more important than ever. However as the mortgage market tightens, lenders are also spending more time with due diligence regarding property appraisals. Lenders are more thorough in underwriting new loans that are being used to buy these types of properties, especially if the new buyer is using VA or FHA financing. Purchase agreements are being examined by underwriters to see what type of inspections are being requested to determine any possible "red flags" with the property. Every financed purchase transaction will require an acceptable appraisal, and underwriters are reviewing appraisals more in depth as well. If any note is made by the appraiser about anything pertaining to the condition of the home such as possible roof issues, age of the heater, etc, underwriters are requesting additional inspection of these items and possibly additional repairs to be completed prior to closing. Underwriters are also examining appraisal photos. If they see in the photo a spot that looks like a roof leak on a wall or ceiling, they may require additional inspections, repairs and certifications prior to closing. It is a good idea to consider any possible inspection and repair costs as part of your costs for the property since the lender will require all systems (plumbing, heating, roof, structure, etc) to be in acceptable condition before they will allow you to close on your purchase" I specialize in estate sale properties and I often advise the seller to price the home for a 'cash only' sale due to the fact that this financing glitch will only make the process more cumbersome for them. I have not seen issues with finding cash buyers. I have, however, seen numerous issues arising out of the more stringent lender and appraisal requirements. So, before you set out to buy the bank owned property or fixer-upper, be aware and informed!
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