Buying a home can be one of the most rewarding experiences of your lifetime. However, people jump into buying decisions without taking the time to ask some important questions that, if not answered properly, can turn their thrilling purchase into a source of unending stress. One area where this happens often is on purchasing a foreclosed home.
1. What Will I Do with the Property? When you purchase the property, what is the short and long-term plan? Are you going to make it your home? Will you fix it up and sell? Will you rent the property? Think about what you will do immediately, and what you will do in the next five, ten, or twenty years.
2. What is My Budget? Think about the full price of the property, not the monthly payments, so you can organize your future budget properly. Once you have an idea of your top price, you can start thinking about monthly payments, but make total price the primary concern.
3. How Much Money Will I Have After the Purchase? Yes, you can find foreclosures that are in great shape, but most will need some repairs and remodeling. How much cash will you have on hand after your purchase? You may need tens of thousands of dollars to make the home livable, so think carefully.
4. Why is the Property Being Foreclosed? This is a perfectly fair question to ask to home seller. If you are buying a foreclosure, you deserve to know why the property is up for sale. Is it because the previous owner was laid off? Was the home simply too expensive? Did they stop making payments for a unique reason? Knowing the why will help you make an informed decision.
5. What is the Market Value of the Property? If the home was not being sold in a foreclosure, how much would it be worth? Is there a significant difference between the foreclosure price and the appraised value?
6. What is the Age of the Roof, Plumbing, HVAC, Wiring, and Other Features? While you’re discussing the age of the home, be sure to ask about the history of repairs and maintenance on the home. When was the last time the house was roofed? What are the ages of the A/C and heating units? Is the wiring from the 1950s? Is the plumbing older than that?
7. What Problems Has the Property Had in the Past? This is a very general, open-ended question, and it may lead nowhere, but it remains essential. Ask about past inspections, problems with the foundation, problems with the neighbors, and any other issues that could arise. Because if these problems happened in the past, they could very well happen in the future.
8. How Long The Property Has Been Unoccupied? The longer a home has been unoccupied, the more likely you are to have problems. If the home has not been properly “mothballed,” you could have a long list of issues. The plumbing seals could dry out, the sewer gases could back up, and bugs could have made themselves at home. Understanding the amount of time that the home has been unoccupied may also uncover some other issues as to why the home hasn’t sold.
9. Are there Any Liens Against the Property? The last thing you want is to buy a home that someone else claims. Be sure to thoroughly research the status of the property, and consider getting title insurance, which protects you against any claims on the title by another party. If the property has a lien, it stays with the home; if you buy, it now becomes your problem, not the seller’s.
10. How Was the Asking Price Determined? You are shopping for a foreclosure to save money, so you deserve to know why a specific number is the asking price. The asking price is typically set by the bank, so you should know exactly how it was determined. Ask the agent to show information from you comparable property of recently-sold homes so you have a clear understanding of the deal. With comparable properties, you’ll know whether or not you’re getting a good deal.