Everybody thinks they want to buy a foreclosure...until they walk into one. That's my own quote, and it's based on hundreds of conversations with Louisville home buyers. While not quite the buzz word it was a few years ago, foreclosures are still a reality of the general real estate market.
Here are some things to consider when considering purchasing a Louisville foreclosure:
In Kentucky, foreclosure actions are handled through the court system. Once a foreclosure action is taken against a given home owner, it can take months or more for the home to go to the court-supervised foreclosure auction. The court-supervised foreclosure auctions take place every other Tuesday. The challenge for buyers is most don't know how this process works, and most buyers don't want to buy their home without actually viewing the interior of it before making offer. So the foreclosure auctions are typically attended by risk-tolerant real estate investors hoping to snag a steal. So to reiterate, most of the time houses sold at the foreclosure auction are sold sight-unseen, meaning the buyer has not accessed the inside of the home. There are several other rules that must be followed when buying a court-supervised foreclosure which can be found by reading the handbill of a given sale on the Jefferson County Commissioner's website.
Lots and lots of the homes (I'd estimate over 90%) at the court-supervised foreclosure auction every other Tuesday do not get bought by investors or individuals at the auction. They get repossessed or "bought back" by the foreclosing lender/creditor at the auction. These creditors send their representatives to the auction with instructions to bid the property up to a certain point, and the price they're instructed to bid a lot of the time exceeds what investors are willing to pay. So these properties are repossessed by the lender at the auction. Then some period of time elapses (I've noticed that it's usually months that go by) before these repossessed bank-owned properties end up listed with a real estate agent. Once the property gets to this point, they can be purchased in a fairly traditional manner by prospective buyers with a few caveats...
Louisville Foreclosures can be purchased for below market value which is obviously a positive thing for the buyer, however, in exchange for potentially getting a good or even great deal, the institutions that sell foreclosures (banks and mortgage servicing companies) do not care about a particular transaction like a regular home seller would.
Here's why: These institutions have hundreds, or more likely, thousands of foreclosures on their books. They simply don't have time to care about one particular deal. So when you consider buying a Louisville foreclosure, just know that the decision-maker on the other end of the deal views the house you are attempting to purchase like a serial number. They want to unload the property certainly, but they are not going to go out of their way to cater to a particular buyer's desires.
Louisville Foreclosures are typically marketed to sell in AS-IS CONDITION.
The decision-maker for the Seller (bank or institution attempting to sell the foreclosure) has likely never been inside the house. Unless you are buying a foreclosure from a local bank, chances are the Seller has little to no knowledge about the condition of the property. Many banks these days will contract out the maintenance of their foreclosures to a property preservation company who will examine their foreclosures and sometimes bring the properties up to minimum lending standards in preparation to sell them, but they will still claim to have no knowledge or very limited knowledge of the property. So it's BUYER BEWARE when you go to buy one of these foreclosures. It's important to understand each seller's rules where it concerns making your deal contingent upon a home inspection or other inspections. Most Louisville foreclosures do have an inspection contingency for a given number of days after offer acceptance. It's typically a pass or fail situation so the buyer has the right to void the contract and get their earnest money deposit refunded, but not make requests to the seller for repairs. Make sure, however, that your agent understands and can articulate to you what the rules are so that you don't incur unnecessary expenses when you got to buy a Louisville foreclosure.
Louisville foreclosures are typically priced to sell QUICKLY and for the asking price, if not more.
A Buyer's market has a way of causing buyers to think that they can get any offer accepted, no matter how low. This is generally not the case with foreclosures. Foreclosures are priced to sell within very specific time periods. Institutions that sell foreclosures typically employ real estate agents and appraisers who provide them with pricing information on which to base their asking price. The Sellers are very detailed in their time frames for sale. In other words, they will request value opinions from various real estate agents and/or appraisers with a time frame of 30-90 days to sell.
Pay attention to the rules of engagement on any Louisville foreclosure.
Some Louisville foreclosures have rules about who can buy them at what periods of time during the listing. For instance, if you are a buyer who is looking to purchase a Louisville foreclosure as your primary residence to actually live in, you might have an advantage over an investor who is looking to purchase the same property as an investment home.
In closing, make sure your agent knows the ins and outs of the various foreclosure processes.
I'm always available for your Louisville foreclosure questions. Contact me, or start your search for your Louisville foreclosure now.
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