Advice for buying property in foreclosure or REO

Q: I have spoken to three different brokers about buying a foreclosure. Every one tried talking me out of it and didn't want to help with whatever questions I had about the process. A friend of mine then told me that agents don't make much by selling foreclosures. If that's true, then how can I find someone that wants to help? -- J.

A: Property being foreclosed is sold at public auction, and real estate brokers are not involved. Local procedures vary, but if you make the winning bid, you might, for instance, have to make a cash deposit immediately and come up with the rest within a month. Those who make a business of buying foreclosures often have a line of credit all set up and ready.

You must buy sight unseen; the homeowners losing their property don't have to let you in to inspect. You should have guidance through the whole process from a real estate lawyer to make sure you aren't buying into any legal problems.

If, on the other hand, you're talking about property that's already been through an auction or a short sale and is now owned by a bank, that's a bit different. It's known as REO ("Real Estate Owned") property. An agent can help you buy that, but it can be a frustrating process that requires a lot of patience. You're dealing with committees and it's seldom as simple as buying from an individual homeowner. And banks aren't allowed to just give the property away; they're required to get fairly good prices.

Lots of books are written about buying foreclosures. Go to the library, start studying and find yourself a lawyer.

Get it settled first

I wanted to pass something along to your readers. In my career both as an agent and a personal investor, almost every time I have had a problem, maybe something unfinished, a boundary issue, whatever, and the seller says, "Oh, yeah, that's already solved. Everyone has already approved everything, I just had not gotten around to it" -- alert!-- it never works out. Either it's an outright lie, or the people who approved it can't be located, or there were no permits, whatever.

So folks, the next time a seller says, "Oh, I just had not gotten around to it," your response should be, "Well, we have a closing in 45 days. So I'd say you have 45 days to get around to it."

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.