Caveat Emptor in Real Estate Foreclosures - Buyer Beware

If you're considering buying a foreclosed property, the caveat emptor applies. You should do a title search and pre-approval letter, and avoid overbidding. However, you should be careful when bidding at auctions. The price at auctions may be a steal, so buyers should always do some additional due diligence before bidding. In the meantime, here are some tips for avoiding foreclosure scams.

Caveat emptor

The law of caveat emptor requires a buyer to inspect a property thoroughly before closing a sale. Caveat emptor also places additional duties on real estate agents who represent a buyer. Buyer's agents must accept a fiduciary responsibility to investigate a property for any potential problems, and they must help the buyer find them after the sale. According to Charles R. Sowell, General Counsel of the Alabama Real Estate Commission, caveat emptor protects the buyer by preventing buyer remorse.

Do a title search

Before you purchase a property, do a title search on it. A title search will show whether a property has liens or any other financial obligations. Performing this type of search is critical because it may expose hidden documents. It will also tell you if there are any deed restrictions on the property. By doing a title search, you will avoid a costly surprise later. The title report will also show whether there are easements on the property. If a contractor has not been paid, a title search will reveal whether there are any liens or pending judgments on the property.

Do a pre-approval letter

There are many reasons why you should do a pre-approval letter for a real estate foreclosure sale. Cash buyers have more leverage in the negotiation process, can close a deal faster, and can forgo monthly payments. Pre-approvals also help you hold onto your savings and receive annual tax benefits. Cash buyers also have the responsibility of doing inspections and appraisals. They need to get the appraisals and inspections they want.

Avoid overbidding

Many buyers are confused about what is an overbidding process in real estate foreclosures. When a buyer thinks the asking price is the same as the value of the property, they might overbid. But an overbidder may be making an offer that is below the market value, and the actual sale price may be significantly lower. As a result, they could end up losing the property. Here are some tips to avoid overbidding in real estate foreclosures.

Do a home inspection

If you are interested in purchasing a foreclosed home, you need to do a home inspection. Foreclosed homes are often in need of extensive repairs, from full roof replacements to electrical upgrades. If you are planning on buying a foreclosed home, your inspection should uncover the most critical repairs. After the repairs have been completed, you can move into the property. However, do not forget to ask the bank how long you have to schedule the inspection.