Sales of foreclosed homes involve more parties than a traditional real estate transaction.
Traditional real estate transactions
Let’s take a look at the most simple of real estate transactions. If you were buying a friends home, there would be two individuals involved in the sale: you (the buyer) and your friend (the seller). You would negotiate a price and terms among yourselves and work to transfer ownership of the property together. Most real estate transactions work like this with the addition of real estate agents that help with the administrative details of marketing, negotiating and closing.
Foreclosure real estate transactions
Now, when we consider a transaction in buying a foreclosed home things can become much more complex. In addition to the buyer and seller, there are a host of other individuals involved mostly representing the corporate seller. Here is an example of the individuals that are typically involved in the closing transaction for a foreclosed home:
- The buyer – that’s you!
- The seller – the corporation, bank, hedge fund, investor, etc that actually owns the property
- The real estate agents – both the buyer and seller may have an agent
- The asset management company – an outsourced company that the seller hires to manage the real estate agents and property preservation companies that maintain the property.
- The property preservation company – a company who hires local contractors to do tasks such as mowing the grass, changing locks and winterizing the property
- The seller’s attorney – many corporate sellers have a national network of attorneys that work to prepare deeds and process legal paperwork such as contract addendums
- The seller’s closing agent – the seller may have a title company they prefer to use to issue the title insurance and process closing statements
- The local closing agent – the local closing agent that has you sign the documents prior to taking possession of the home
Understanding the roles
This example doesn’t even include others who are involved in the transaction such as your mortgage company, home inspector, etc. With the expanded complexity of the sale of a foreclosed property combined with the additional individuals involved many opportunities can exist for things to go wrong. It’s really important as a buyer to understand who is responsible for what aspect of your home purchase. The best advice is when you don’t understand someone’s role, ask for clarification.