Monday, February 7, 2011

Buying a Distressed or Foreclosed Home in Boston

Buying a Distressed or Foreclosed Home in Boston 

For many buying buying your first home is a very challenging experience. You ask advice from friends, colleagues and relatives. Everyone seems to have an opinion. Some say focus on New Construction, others say find an established Condo with low condo fees still others may offer up advice to buy a distressed or foreclosed home.

Today we're going to focus on buying a distressed or foreclosed home. What to expect when you decide you want to take advantage of the low sales price.


  • If the property is bank owned, it is NOT advised to put in a low ball offer. The bank has taken the time to hire at least 3 very experienced local agents to provide them with a Brokers Price Opinion based on the size, location and condition of the home. They then hired a highly qualified listing agent to market and sell the property. By placing a "low ball offer" you are disqualifying yourself and the risk of losing the property to a much more savvy buyer.
  • Unlike buying a "Short Sale" or "Owner Occupied Home" that has been treated with love and attention, these homes are usually the result of a lengthy process which started in most cases a year ago with a Notice of Default and then escalated to an foreclosure and eviction. The former owner may or may-not have had the funds to do some of the required maintenance on the property and if they did had time to remove any improvements before they left the home.
  • Since it is the winter, most of these properties will not have heat or running water - if you decide to place an offer and it is accepted it is your responsibility to have the property dewinterized and winterize for the home inspection
  • If the property is priced to sell - expect to go into a bidding war and remember the person with the least amount to finance and strongest pre-approval will usually win. Next to first in line who is usually the "Cash Buyer"  So, if you have only 3% to put down and ask for a closing cost credit - even with a full price offer. In the banks eyes this is a "Weak Offer"
  • Properties being sold under $50,000 will not qualify for a mortgage, if you are considering this type of property you will most likely have to buy with cash. And I suggest going to the bank BEFORE making the offer to find out if you qualify for a personal loan. Again, if the bank reads it's subject to financing they will most likely move to the next offer without this contingency.
  • Don't expect the bank to provide any information about the property, they have never occupied it and therefore do not know about the roof, pipes, if the appliances work or neighborhood.
  • In most cases the bank will not consider a "203K Mortgage" when reviewing offers, please consult with your buyers agent if you are planning this type of financing. It's a long and arduous process and the bank usually wants the property off their books as quickly as possible.
  • If your offer is accepted and you preform a home inspection - do not assume the bank will preform any maintenance to the property if flaws are found. Most properties listed and sold by the bank are done so with "As Is Condition" clause.
  • If you plan to occupy the property after you purchase it, please plan in advance to home shopping and budget how much you can spend to make this property yours. I suggest at least $50,000 unless you're lucky enough to find a "Mint Condition Property" but in most cases these homes need More than Paint, and cleaning. Discuss your plans with your buyers agent so they can help with the selection of appropriate homes that will fit your budget

Distressed Condos

This is another subject  When considering the purchase of a distressed or foreclosed condo. It's important to know the financial stability of the condo complex. If you're a first time buyer seeking MA Housing or FHA financing, the following must be in place for your bank to consider the purchase

  • Is the owner occupancy at least 51%
  • Has the complex been FHA approved?
  • Does the complex have at least 20% of the annual operating expenses in the reserve?

If the complex is not at least 51% owner occupied wheather it's a distressed, foreclosure or resale, this can be a challenge for FHA and MA Housing. Consult your mortgage broker for more information.


For more information or representation when buying a distressed or foreclosure in or around the Boston area. Feel free to contact me direct.

Lisa Coates


Prudential Preferred Realty


Boston's Northwest Real Estate Specialist

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