Posted by keithk2 on November 26, 1999 at 11:47:40:
Tony,
I’m in the middle of purchasing a house from an owner who was foreclosed on. Yes, you can use a purchase agreement to buy it from him but you should specify that the underlying encumberance must be paid at closing. (The title company will require it as well but I like keeping things locked up tight.)
You shouldn’t have trouble with new owners in there since the bank can’t move on it until the redemption period is over and the owner is usually still in possession of the premises during redemption (at least they are here in Michigan). In the case of the house I’m buying, the bank had an appraisal done as part of their foreclosure procedings and we were able to use that when applying for a new mortgage.
Expect to see quite a difference between the mortgage balance he had before the foreclosure and the amount necessary to redeem the property. The bank in our deal added almost $6,000.00 to the balance for back payments, legal fees, appraisals, funding the tax escrow deficiency, advertisiments of the sale, etc,. etc. Get a payoff letter from the bank stating the redemption amount needed before you make your offer.
One other thing. Make sure the closing is BEFORE the redemption period is over. The bank doesn’t HAVE to allow redemption after that date and they will usually make you wait and buy it through either them or their broker (At full FMV, of course). Most banks have realized what we investors have known all along:
There’s gold in them thar’ houses!
They’ll be just as eager to pocket your profit as you are if you miss the redemption date.
Hope all of this helped. Feel free to email me if I can be of any other assistance
All Success
Keith Karolyi
K2 Property Services
1 888 665 2001
keithk2@bignet.net