Foreclosures
- Build Your Team - Part 3

The Denninger Report  - by Gini Denninger

It's possible repair costs were figured into the banks asking price, if so, no deduction. An agent can figure if a discount was included. Banks may partially discount, if that's the case, the rest of the repair costs should be factored before determining a bid. After subtracting repair costs, 80% of the resulting sum is an offer that usually is seriously considered. For example; if buying a home that should sell for $100,000 in good condition, needing $30,000 in repairs, determine what 80% of $70,000 is - and that’s your offer. Buyers should be firm with the maximum amount they are willing to spend. Going off track creates problems!

When writing the offer, agents should include several clauses.

1) The right of inspection which is a buyer’s protection, not to ask for repairs, but to uncover major issues that might make buying too costly. If too costly, the clause should give the right to withdraw from the deal without penalty.

2) Utilities should be on for inspection, to facilitate evaluation of the furnace, hot water tank and electric system.

3) An exit clause - the offer dies if the appraisal comes in for significantly less than estimated value, especially if paying cash!

Attorneys can make additional suggestions regarding protective clauses. It’s crucial to have a real estate attorney on the deal, not just the family lawyer. Foreclosure buys require professionals who are very familiar with foreclosure deals, to catch irregularities and to help protect buyers’ interests. One legal area often over looked is title insurance. Its recommended foreclosure buyers have their own title insurance policy. Banks always have a policy included in mortgage costs, but this doesn’t protect the buyer! There are two types, one for bank protection, the other for buyer protection. Attorneys should discuss the ins and outs of this topic thoroughly with their client, but will usually do so only when asked.

Lastly, a NYS licensed inspector should inspect the property. Agents should suggest several inspectors to choose from. They are a crucial member of the team in determining, without bias, repair issues with a property. Additionally inspectors can help prevent further damage to a property, which could be exacerbated by not being tended to immediately after buying. For example, broken pipes could lead to serious water damage!

A well-chosen team can make for a good experience. It’s crucial to stress foreclosures, if not researched and handled properly, can cost time and money. Buyers must be educated and work with their team of experts to find the right property. Buyers should never “go it alone” unless very experienced with this market. Following the rules equals winning the foreclosure game!



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