Expert: Sue Bernstein - 7/19/2004

Question
Dear Sue,

    I have never own a home (and nobody from my immediate family has either).  Based on my great credit but low income I can qualify for up to $300,000.  Unfortunately that amount in Southern California (my current location) is not enough even for a shack!  

    Recently while browsing the web inadvertently I did a search for foreclosure listings in my area.  I was surprised to see a house with six bedrooms and five bathrooms with a price of $140,00.  I have done some reading and now I know what a Notice of Default is, What's an REO, and the difference between pre-foreclosure and a foreclosed home.

    Would you recommend for a first time buyer such as myself to buy a pre-foreclosure or a foreclosure?    Are the final prices for foreclosed homes really that much lower or is it all a mirage?  How would it benefit me to enlist the assistance of a Real Estate Agent?  What would his/her duties be (compared to those duties under a regular purchase)?

    In advanced, Thank you sooo much for your assistance and prompt reply.

Kind regards,
Michael

Answer
Dear Michael,

Until a home is foreclosed it is still owned by the party facing foreclosure.  An REO means "real estate owned" and refers to a lender now owning a foreclosed property.  In this market it is rare to come across foreclosed properties because the party in default can usually sell the house before it goes to foreclosure.  Usually when you buy a foreclosure it is sold totally "as-is" and some of the costs usually borne by the seller has to be paid by the buyer. I don't personally think you necessarily get a better deal buying a foreclosure.
Since you have never purchased a home before I can't imagine any good reason for you not to go through it with an agent.  This person is in the best position to find the best properties for you and will be there to make sure you are protected throughout the process.  They will be negotiating to get you the best deal, guide you through the inspections and every other aspect of the process.

I hope you have found this helpful.

Sue Bernstein
www.SueBernstein.com