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