I was recently asked how buying a foreclosure is different from buying a traditional property. If the foreclosure is listed on the mls as most are, the procedural process of writing an offer, and going through the various steps of escrow is the same.
The differences are primarily strategic. Foreclosures tend to get multiple offers, far more than traditional sales. They are typically priced a bit under market value in order to generate lots of buzz and get buyers excited. Thus, more offers usually come in.
Bidding on a home with multiple offers is different than bidding on a home with no offers. Low-balling usually does not work. If the seller has a higher offer than yours, they will just accept the higher offer without bothering to offer you a counter offer. Also, foreclosure contracts are typically awarded not only to the highest offer but to the buyer with the strongest cash position. Cash buyers go to the top of the list if the offer is competitive. Why? The seller has a reduced risk of the deal falling out due to financing difficulties.
Foreclosure homes are sold ‘as-is.’ The seller will do no repairs, thus augmenting the importance of a thorough home inspection. The seller may or may not pay for a termite clearance and home warranty. The only other difference is there will be no seller disclosures since no actual member of the bank has ever stepped foot in the home.
When writing offers on either a foreclosure or short sale, you do want to make sure that your agent has experience with these types of deals. You want to have the competitive edge!