Frequently Asked Questions about Foreclosures


Is buying a foreclosure a good investment?

It really depends on the particular property.  Before placing an offer on a foreclosed property your agent should provide you with a Comparative Market Analysis (CMA) based on recent sales of homes in the same neighborhood.  Using the CMA and adjusting for necessary repairs/updates you can determine the true value of the property.

What condition can I expect a foreclosed home to be in?

The condition varies from property to property.  Generally speaking most foreclosures are in pretty rough condition.  It is quite common for people to take fixtures, lights, garage door openers, window treatments and anything else of possible value.  There have also been cases of people holding "Foreclosure Parties" and trashing the house just before abandoning the property.

Are there foreclosures in popular cities and subdivisions?

In Southeastern Michigan there are foreclosures in just about every community and subdivision.  The current economic climate in the state of Michigan has no boundaries, there are people affected in every area.

What is a REO property?

REO is a term (Real Estate Owned) that banks use to indicate that the property is owned by the bank.

Why do banks let the properties go for lees than what is owed to them?

Banks are in the business of loaning money to individuals and companies; they are not in the business of owning real estate or being landlords.  Banks and financial institutions have to maintain certain ratios of assets and holding too many properties can put them in violation of their charters.

Will I get the keys at closing?

Often banks will require that the closing take place in escrow.  Some banks want to make a final review of the documents before they sign, this causes a delay typically of 1 or 2 days.  When you do receive the keys you will want to be sure to change the locks right away since there is no telling who has copies of the keys.

Are there any special fees when purchasing foreclosures or REO properties?

Some banks charge a processing fee for handling the transaction.  These fees can be up to a few hundred dollars.  Occasionally there are other charges that the bank or title company may expect you to pay.

Can I move right into the home after closing?

Actually moving into the property will depend on the condition and also city requirements.  Some cities require a city inspection and will issue a Certificate of Occupancy when the house meets the city requirements.  Even if you purchase a property that requires only minor repairs it could take some time to complete the repairs and receive the certification for the city.  Check with the building/inspection department of the city you are considering purchasing in.

What about Homeowner Association Fees?

Be sure that the title company has the necessary contact information for the homeowners association where the home is located.  Don´t assume that the bank will provide this information; if you do you could be in for a surprise after you move in.

Why are property taxes higher on foreclosures?

In Michigan you can receive a property tax discount on your "Principle Residence".  In order to receive the discount you have to file a Principle Residence Exemption form with your local municipality.  When the municipality learns that the property is vacant they will revoke the Principle Residence Exemption status.  At closing you will receive the paperwork to apply for the exemption.  Exemptions are only granted once per year in the spring, so if you apply too late you will have to pay the higher rate until the next year.