Tips on Buying Foreclosures.....

Distressed sales, including foreclosures and short sales, accounted for about 45% of total home sales for the nation in the fourth quarter of 2008 and the first quarter of 2009, according to the National Association of REALTORS®. Because of the influx of these properties on the market, qualified buyers have new opportunities to obtain affordable pricing, low mortgage rates, and financial incentives such as the $8,000 federal tax credit available to first-time homebuyers.

“Buying a foreclosed home can be a complex process. We want to help consumers be aware of what is involved and of ways they can make that process go smoothly,” said Paul Valentino, president, Greater Washington, DC. “It is important to work with a professional - experienced in distressed sales who can help you make use of the current incentives while they last.”
To help consumers navigate through this type of purchase, Coldwell Banker Residential Brokerage in Greater Washington, D.C. has released its list of Top 10 Tips for Buying a Foreclosed Home in the Greater Washington, D.C. Region:

Banks like all-cash deals. Large down payments can also help you win your bid. Lenders and government agencies are more likely to choose a buyer who can close quickly.
Be patient. It can be a long and complex process up to four months or longer and negotiations must be expertly managed. Buyers should work with full-time REALTORS® who understand this unique process.

You might have to do a little work. Some homes are ready to live in and some homes need work, but the latter usually offer a better deal if you’re handy. If a home needs energy efficiency-related repairs (i.e. new roof, insulation), it may qualify for more than $6,000 in additional funds to make the repairs via a federal Energy Efficient Mortgage. The FHA 203K loan is another option; this program allows you to purchase the home and incorporate the cost of repairs into the loan amount. Keep in mind though – a cash deal will beat out your financed offer almost every time!

Negotiate a one-year home warranty. You want a warranty that specifically covers foreclosed properties and any undetected defects. The home you're purchasing may have been vacant for a long time. A lot can happen to appliances during that vacant period.

Be aware of current buyer incentives. There are many financing options today and many first-time buyers are eligible for an $8,000 federal tax credit, which you can file for this year as soon as you close on your home. Be aware - there is a time limit on this tax incentive.

Act Fast, Great Deals Don’t Last. If you need a loan, work with a lender to get pre-approved for a mortgage and interest rate so you can act as quickly as possible when you find a home. Great deals on foreclosures are gone almost as fast as they appear. Be prepared to make your offer as soon as you can. Delaying a day can literally cost you the purchase.

Be realistic about the discount on foreclosures. The perception that foreclosures offer good value is often true. Final sale price depends on the condition and location of the property, how long it has been on the market, and the number of interested buyers. With many active buyers, don’t expect a big discount off the asking price.

Know what title you hold. A Marketable Title is the best title to have as it ensures all liens on the property have been released with a certificate of satisfaction. If you have an Insurable Title, it means there are unreleased liens on the property. You are covered by the insurance, but should you sell or refinance the home, the unreleased liens will have to be properly recorded and may incur additional costs or even delay the transaction.

Know your rights. In Virginia, the bank is responsible for paying the Grantor’s tax. In Washington, D.C., both the bank and buyer share the cost of the Grantor’s tax; in Maryland the tax is paid 50/50 by the bank and the buyer. Some sellers (lenders) try to pass the entire tax bill along to the buyer.

Read the fine print. Most banks draft and require buyers to sign an addendum. Read the fine print and understand what you are signing. For example, a bank addendum could contain language that makes the buyer liable for liens filed on the property after it goes under contract and before it closes. Be aware that contractors have 30-45 days to file a lien for non-payment of services rendered. So, a lien for work done before the contract was signed could still end up being the buyer’s responsibility.