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Bankruptcy foreclosure: legal issues for buyers

If you are interested in buying a bankruptcy foreclosure, be aware of the pitfalls of this type of home for sale.

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bankruptcy foreclosureIf you're looking for a good deal on a home, you may have considered purchasing a bankruptcy foreclosure. These homes either have been through the foreclosure process or are currently part of a bankruptcy procedure. If you choose to go this route, you should take several steps to protect yourself. Although you can score a dream home by buying a foreclosure, you'll need to be aware of built-in pitfalls to look out for while you wait to purchase your new home.

Homes included in the foreclosure listings in the paper could actually have several different statuses as far as availability is concerned. Some of the bankruptcy foreclosures might have already been returned to the bank, which means they could be vacant and waiting for a new owner to move in. Other homes might still be caught up in the bankruptcy process, which could mean the current owner is still trying to save the home. Additionally, the home could be involved in a short sale. It's important to find out where the home is in the process before you commit time, energy or funds to purchase it.

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When you purchase a foreclosure, you are buying a home as-is. This means that if the plumbing is bad, you'll need to have it repaired. You don't have the option to have the seller fix things before you buy in a foreclosure home sale. This is a literal case of "what you see is what you get." It's a good idea to do a walk-through of the home and get an professional inspection so you know if the home has any problems.

To read more about buying homes in foreclosure, go to this article. It covers all of the aspects of buying distressed properties.

Homeowners who are dealing with a bankruptcy foreclosure are most likely behind in their mortgage payments. They're also most likely behind in other necessary payments for the home as well. Property taxes, home association fees and other financial obligations in arrears can cause the home to have liens. If you purchase a home with liens, those financial obligations become your responsibility. Do a title search on the property before you make an offer. 

If you want a good deal on a home, purchasing a foreclosed property could provide one. But it may provide problems instead. If you would rather look at other foreclosed homes, go to Reply! to get property listings in your area.

Photo credit: The Lane Team via Compfight CC.

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About the Author

Larque Goodson is an real estate editor at Reply! She has 20 years of experience in photojournalism and marketing. To share ideas about real estate, find her on Google+.