Buying A Foreclosure Property

by Deborah
(Foley, Alabama USA)

Ask Kate about buying a foreclosure property: Hi Kate, We are under contract buying a foreclosure property. We are getting a FHA loan. The appraiser found that the Heat Pump did not work. Our Real Estate Agent says if we want the house, we would have to make repairs.

But we do not have the money to repair the heat pump. What happens now? Can we get our earnest money back? What about the money we paid for the appraisal?

We feel that we were mislead by our agent and think that she knew it was broken. We did not check it out ourselves when we looked at the house. We thought that would be something that the seller would have to fix, even though the house is sold as is.

Kate Answers: Buying A Foreclosure Property

Dear Deborah,

If you don't read anything else here, read this: The first step to take after finding a house to buy is to hire a home inspector. And when buying a foreclosure property, even more so!

You are a classic example of someone caught between a rock and a hard place. You found the house you want. But the bank won't lend you money unless the heat pump is fixed. Yet you don't own the house in need of repair.

Well, you are not alone. Many home buyers understandably do not want to pay for repairs on a property not yet purchased.

Property Appraisal Versus Home Inspection

But let's back up a moment. Are you aware that property appraisal is not the same as home inspection? Appraisals are mainly for bank purposes. But inspections are for you, the prospective homeowner.

FHA strongly encourages home inspections and why wouldn't home buyers wouldn't want one, especially when buying a foreclosure property. Read more about home inspection at my article, Whoa! Home Inspector - Our Big Mistake

Appraisal And Earnest Money Refunds

Now about your two deposits. Check the paperwork from your lender regarding upfront deposits to know whether or not your appraisal money is refundable. You can call your lender to ask also.

Will your earnest money be returned? Generally if a mortgage lender denies a loan request, earnest monies are refundable.

Inspections For Buying A Foreclosure Property

Back to home inspections, I can't emphasize how important they are, and even more so when buying a foreclosure property! Remember, the BANK requires an appraisal. But YOU need a home inspection, especially when buying a foreclosure property.

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Best Wishes,







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