Understanding the Closing Process for Foreclosed Properties
There can definitely be some benefits associated with purchasing a bank-owned property,
including the fact that you may be able to purchase it for less than market value. Even so,
it is important to understand that the closing process for purchasing a foreclosed property
can often be difficult than when closing a traditional home purchase. If you are considering
purchase of a foreclosed property for investment purposes at some point in the near future,
you must make sure you know what to expect in advance.
First, you should anticipate the fact that the bank that actually owns the property may very
well be located at least in a different part of the state if not in a different area of the
country. Consequently, it is not uncommon for the bank to use an asset management company to
help them with the numerous foreclosures they are likely handling at any one given time. It
is also not uncommon for the asset management company to be located practically anywhere in
the country. To facilitate the closing of the transaction, asset management companies often
retain the help of local attorneys. The attorney will usually work in conjunction with a title
company in the local area to help in obtaining all of the documentation that is necessary to
close the transaction. Due to the fact that there could very well be three different parties
involved on the selling end of the transaction, all of whom could be located in different time
zones there is an increased chance of delays occurring during the closing. When purchasing a
foreclosed property, you must be prepared to be patient and for the entire transaction to take
longer than would typically be expected in a traditional transaction.
One of the reasons there can sometimes be a delay is that foreclosing attorneys usually require
a HUD review at least 48 hours before the closing, if not slightly farther ahead of time. The
deed cannot be recorded and you cannot take possession of the property until the foreclosing
bank has approved the HUD. HUD refers to the Housing and Urban Development settlement sheet.
This sheet contains the final costs for the closing of the transaction. If you are financing
the purchase of the property, your lender will usually require what is known as a clear to close
from the title company before the HUD settlement statement can be sent to the foreclosing attorney.
All of these steps must carefully be followed in order to close the transaction.
You should also keep in mind that even in the event the HUD statement is sent to the foreclosing
attorney within the appropriate timeframe, this is not a guarantee that the foreclosing bank will
actually approve the HUD statement by the scheduled date of closing. In many instances the buyer
will need to sign the documents in escrow. This means that you cannot take possession of the property
until the foreclosing bank has actually approved as well as signed the HUD statement. Naturally, this
can be somewhat of a waiting game and as a buyer it is one that can be quite frustrating because you
are at the mercy of the foreclosing bank, waiting for them to sign the necessary documents so that you
may take possession.
Although there might not be anything you can do to hurry the foreclosing bank along, there are some
steps you can take to make the transaction go a little more smoothly. First, it is important to make
sure you use a title company that actually has experience in handling the closing of foreclosed properties.
As you can see, closing a foreclosed property requires special documentation and handling. Using a title
company without experience in handling such transaction may result in unnecessary delays.
It is also important for you to make sure you have a solid understanding of how the process works when
buying a foreclosed property so that you will have realistic expectations. When working with all parties
involved in the transaction, make sure there is continual communication throughout the entire process. If
you haven't heard from the title company recently, check in to find out how things are going. There may be
a problem that you are unaware of.
Buying a foreclosed property can sometimes be a time-consuming and challenging experience. If you are
able to make it through the entire process it can often be well worth it, considering the amount of money
you may be able to save.