We get a lot of questions about foreclosures. Where they are, how to find them first, etc.
There's a perception out there that foreclosures are good deals. However, when you tell your real estate agent that you'd like to look only at foreclosures, you'll probably be met with not only hesitation & this question, but also a look of dread.
Because we know that, unless you're an investor that's been investing in foreclosures for a while, you're not going to like the process of buying a foreclosure.
Okay, okay, calm down, I know it's not always difficult, but let me just give you a few examples from the past week.
In my area at least, HUD (Department of Housing and Urban Development) needed to change the title company they were using. So, since there's so many foreclosures, they had to halt contract acceptance and closings for a few weeks in order to locate and negotiate with a new title company. 3 short weeks later, everything is set back in motion. This backed up the new title company with over 600 properties that were waiting to be closed. What a mess to inherit right? Well, if you were a buyer during this time, your offer got accepted and you then sat and waited to close. But, guess what...HUD has a per diem of $50/day on your particular property if the closing has to be extended. Once you finally got a firm closing date from the new title company. You, as the buyer, were forced by HUD to overnight a cashier's check to HUD equal to the $50 x the number of days it would take to close. EVEN THOUGH IT WAS HUD'S FAULT. Yes, HUD will pay you back (via check in the mail after you close). Let me tell you---buyers are not happy at this point and guess whose fault it is? Well, no, it's not your real estate agent's fault---remember their hesitation to sell you a foreclosure? Nope, it's not the title companies fault either. Nope, nope, not the listing agent's fault. It's the government and they could care less about how happy you are about their service. Go ahead, get in line to yell at the government.
How about this one: You find a Fannie Mae foreclosure you'd like to buy and you'd like to utilize your inspection period to fully inspect the property. Oops, no can do...the property has leaky pipes and before you can inspect it, the pipes have to be approved and repaired before you can even inspect. Well, that could possibly take weeks.
Or this one: Everything goes well, you've done inspections, gotten the loan--almost, but now it's time for the FHA appraiser to roll through the property and give their stamp of approval on the home for your loan. The appraiser comes up with a couple of items and now everything is thrown into a tailspin because now the property cannot close until the repairs are made, but YOU have to wait for Fannie Mae to approve and repair the property (at your expense). Plus, since the cost of repairs gets added to the loan, now the property has to appraise at the higher amount. Best of luck with that.
Be aware, there are many, many great deals out there that are just regular resale homes that have been on the market longer than the seller desires. There's also some easier-to-deal-with foreclosures from local banks. But if you're looking to save a wad of cash on a government foreclosure, you're most likely going to be put through the wringer. No different than digging through the sale racks and bins at your favorite store---it's just going to require a little more work in order to get that $3 jacket marked down from $100.