Purchasing a Foreclosed Property

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    14-May-2015

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<ul><li>1.Purchasing a Foreclosed Property How to protect yourself from a REO disaster</li></ul> <p>2. Consult With An Experienced Attorney </p> <ul><li>Potential Issues </li></ul> <ul><li>As Is Sale </li></ul> <ul><li><ul><li> Condition of Property </li></ul></li></ul> <ul><li><ul><li> Condition of Title </li></ul></li></ul> <ul><li>One-sided Purchase Agreement </li></ul> <ul><li><ul><li>Seller can enforce, buyer can't </li></ul></li></ul> <ul><li><ul><li>Hidden costs </li></ul></li></ul> <ul><li><ul><li>Hidden property problems </li></ul></li></ul> <ul><li><ul><li>Hidden title problems </li></ul></li></ul> <ul><li>Liability Issues </li></ul> <ul><li><ul><li>No recourse against seller </li></ul></li></ul> <ul><li>Legal Options </li></ul> <ul><li>Hourly Billing vs. Flat Fee Billing </li></ul> <ul><li><ul><li>NLF will provide you with a flat fee option </li></ul></li></ul> <ul><li>Representation from start to finish or by need </li></ul> <ul><li><ul><li>NLF will represent you from start to finish, or </li></ul></li></ul> <ul><li><ul><li>By need - initial consultation, purchase agreement review, title commitment review, closing document review </li></ul></li></ul> <p>3. Hire Experienced Real Estate Agent </p> <ul><li>Experience Matters </li></ul> <ul><li>What experience does he/she have with foreclosure purchases? </li></ul> <ul><li>Is he/she willing to work hard to checkout potential properties? </li></ul> <ul><li>Is he/she familiar with pricing for foreclosures in the market you are interested in? </li></ul> <ul><li>Teamwork Matters </li></ul> <ul><li>Will he/she work with the other professionals you need to protect yourself - attorney, CPA, title &amp; property inspector? </li></ul> <ul><li>Does he/she have relationships with other professionals that you may need to protect yourself? </li></ul> <p>4. Liability Protection </p> <ul><li>Investor Concerns </li></ul> <ul><li>What if someone gets hurt? </li></ul> <ul><li>What if the deal goes bad? </li></ul> <ul><li>Liability Solutions </li></ul> <ul><li>Create a business entity for the purchase </li></ul> <ul><li><ul><li>Limited liability company </li></ul></li></ul> <ul><li><ul><li>SubChapter S corporation </li></ul></li></ul> <ul><li>NLF will create one for you on an hourly basis or a flat fee basis. </li></ul> <p>5. Consider Possible Tax Issues </p> <ul><li>You should consider consulting with a CPA </li></ul> <ul><li><ul><li>Time to consider tax issues is before you sign a purchase agreement </li></ul></li></ul> <ul><li><ul><li>Business entity choice should be reviewed by CPA </li></ul></li></ul> <ul><li><ul><li>NLF will work with your CPA </li></ul></li></ul> <ul><li><ul><li>If you need a referral, </li></ul></li></ul> <ul><li>NLF can provide one for you </li></ul> <p>6. Property Inspector </p> <ul><li>Detailed Property Inspection is Vital </li></ul> <ul><li>As-is deal - no recourse after purchase </li></ul> <ul><li><ul><li>Foreclosed properties have many potential physical problems </li></ul></li></ul> <ul><li><ul><li>Normal "visual"inspection, not good enough </li></ul></li></ul> <ul><li><ul><li>Need construction expert </li></ul></li></ul> <ul><li><ul><li>May need further testing </li></ul></li></ul> <ul><li>What warranty does your inspector give you </li></ul> <ul><li><ul><li>Just a return of inspection fee? </li></ul></li></ul> <ul><li><ul><li>Is he insured? </li></ul></li></ul> <p>7. Checking Out Properties </p> <ul><li>Due Diligence By You and/or Your Agent </li></ul> <ul><li><ul><li>Fire Department generally knows about frozen pipes </li></ul></li></ul> <ul><li><ul><li>Police generally called if the home was vandalized </li></ul></li></ul> <ul><li><ul><li>Neighbors know a great deal about properties </li></ul></li></ul> <ul><li><ul><li>Check with city about water bill and unpaid assessments </li></ul></li></ul> <ul><li>Common Problems </li></ul> <ul><li><ul><li>Water problems from burst pipes </li></ul></li></ul> <ul><li><ul><li>Mold </li></ul></li></ul> <ul><li><ul><li>Missing wiring, pipes, etc. </li></ul></li></ul> <ul><li><ul><li>It's not what you can see, its what you can't see that matters </li></ul></li></ul> <p>8. The Purchase Agreement </p> <ul><li>Seller Controlled Purchase Agreement </li></ul> <ul><li>Need to read and understand the purchase agreement </li></ul> <ul><li>Nothing is like a standard purchase agreement </li></ul> <ul><li>Make no assumptions </li></ul> <ul><li>Potential Issues </li></ul> <ul><li>Does seller require you to use their title company? </li></ul> <ul><li>Is seller bound to the deal? </li></ul> <ul><li>What costs are the seller agreeing to pay? </li></ul> <ul><li>Time issues </li></ul> <p>9. The Title Commitment </p> <ul><li>Not All Title Commitments Are The Same </li></ul> <ul><li>Seller is not promising that they have good title, so you have to have the proper title coverage </li></ul> <ul><li>Like all insurance, it's all about what is covered and what is not covered </li></ul> <ul><li>Title insurance companies are not obligated to give you the best coverage </li></ul> <ul><li>You Need a Marked Title Commitment </li></ul> <ul><li>A title commitment is the title companies promise of what title policy they will give you </li></ul> <ul><li>A "marked" title commitment is the negotiated title commitment that you need before you close. </li></ul> <ul><li>NLF can negotiate the title commitment for you. </li></ul> <p>10. The Closing </p> <ul><li>Last Chance to Get it Right </li></ul> <ul><li>You need to read and understand all of the closing documents. </li></ul> <ul><li>Don't rely on what you are told, what counts is what is in the documents. </li></ul> <ul><li>Once you close, there is no turning back </li></ul> <ul><li>You're On the Hook for a Lot of Money, You Better Make Sure Everything is Right </li></ul> <ul><li>If you don't understand what you are reading, find someone who does </li></ul> <ul><li>It is not always what is in a document as what is missing. </li></ul> <ul><li>NLF can review and explain the closing documents for you </li></ul> <p>11. </p> <ul><li>For all of your real estate needs: </li></ul> <ul><li>763-862-6100 </li></ul> <ul><li>E-mail: nash@nash-law.com </li></ul> <ul><li>Website: www.nash-law.com </li></ul> <ul><li>Facebook:facebook </li></ul> <ul><li>Twitter: mnrealestate@ </li></ul> <ul><li>Blog:minnrealestateblog </li></ul>