Savvy home buyers may find bargains among foreclosed homes the distressed economy has put on the market. However, the Better Business Bureau urges buyers to educate themselves about the potential pitfalls of buying foreclosed properties.
“Bargain-hunters see foreclosures as a chance to buy prime properties for below-market prices,” said Pam King, president/CEO of the BBB serving northern Colorado and greater Wyoming. “While the purchase price may be lower, buyers need to be prepared for the unexpected, especially if they buy the properties at an auction.”
Lenders filed foreclosures against 2.8 million properties in the United States last year, up 21 percent from 2008, according to RealtyTrac, a California company that tracks foreclosures and markets property.
Properties sold through a foreclosure auction may not be available for inspection before the purchase is made, leaving bidders in the dark about their condition. In some cases, potential bidders may be able to obtain a property’s address, so they view the exterior in advance of the auction.
Some buyers have purchased homes only to find they had been stripped of plumbing pipes, light fixtures or had otherwise been trashed by previous owners before the sale.
Buyers may have better luck buying houses put on the market by a homeowner facing foreclosure before the lender completes the process. In some cases, buyers may have a better chance to inspect the property for potential defects. If the buyer owes more than the property is worth, however, the deal could be in jeopardy.
The BBB offers the following tips:
- Know your options. Preforeclosure sales allow you to purchase a house directly from the homeowner before it goes into bank foreclosure. Lenders may also sell properties they have taken over using an agent who specializes in such properties. At auctions, you bid against other buyers at the courthouse or other locations.
- Conduct a title search. This process, usually conducted at a county courthouse, will show whether the property has a second mortgage or lien against it. If it does, you may be responsible for paying off the initial mortgage, any second mortgage loans and any liens on the property before you can take ownership.
- Properties sold at auctions are usually sold “as is.” This can create problems when trying to obtain a mortgage if the property won’t pass inspection.
- Obtain help if you need it. Find a real estate agent who is experienced in foreclosures and check him or her out with the BBB www.wynco.bbb.org. The BBB offers free Reliability Reports on more than 4 million businesses.
- Have your agent check nearby or comparable homes to see if the asking price for a foreclosed home is, in fact, a bargain.
- Consider the costs of cleanup or repairs if the home isn’t in good condition.
For more information on buying a home or to check out a charity or business, contact the BBB at www.wynco.bbb.org or call 800-564-0371 or 970-484-1348.
About the BBB
The Better Business Bureau, founded in 1912, is a champion for ethics and trust in the marketplace. Only businesses that meet the high BBB standards are invited to become BBB Accredited Businesses. Today, 128 BBBs across the United States and Canada rate more than 3 million local and national businesses and charities with scores ranging from A to F. Only a BBB Accredited Business may elect to participate in BBBOnLine, one of the most trusted and recognized Internet seal programs in the world.
The BBB serving northern Colorado and Wyoming reported nearly 1 million instances of service to consumers and businesses in 2009. These services include reliability reports on local companies and charities, access to companies that can be trusted by industry, help with dispute resolution, and trustworthy information on consumer and business topics.
Barbara Read, VP Communications Director, 970-488-2035, bread@wynco.bbb.org