How to Buy

• Does the owner of the property have good and marketable title? Whether you receive a Foreclosure Deed from the bank or a Warranty Deed from the owner, you can get no better title to the property than that which exists in the hands of the seller or mortgagor. Therefore, you should retain an attorney or a title company or thoroughly examine the records at the applicable registry of deeds to make sure that the owner does in fact own the property free of all claims that may be asserted by prior owners or their heirs.

• Liens and encumbrances upon the property must also be ascertained. It purchasing through a broker, the seller must provide you with discharges for all liens and encumbrances upon the property, otherwise you will take the property "subject to" those same encumbrances. If you are buying at foreclosure sale, and the mortgage to be foreclosed upon holds the first position, then the rest of the liens on the property will get wiped-out by the foreclosure sale and will not, therefore, be of and concern to you as the buyer. However, the title search described in the preceding paragraph will ascertain whether or not the mortgagee conducting the sale does in fact have a first lien upon the property. It the mortgage being foreclosed upon is not a first mortgage, then your title search will disclose to you the name and address of all parties holding liens upon the property which take priority over the mortgage, and you must contact those parties to ascertain exactly how much is owed, and then deduct that amount from the price you are willing to pay when you bid. Generally, the auctioneer will have that information prior to the auction.

• If there are buildings on the property, then you should retain a structural engineer or contractor to thoroughly inspect the property to make sure that it is free from any material defects. This inspection also includes a review of the availability and adequacy of all utilities.

• You should examine, through the appropriate town officials, the exact zoning of the property to ascertain whether or not it can be used for a particular purpose. Just because the present owner appears to be using the building in a certain way does not mean it complies with the applicable zoning.

• If you are interested in an income producing property, you should confirm the gross rentals by speaking with the current tenants as well as the amounts paid to operate the property such as utilities, insurance, taxes and maintenance.

• In the case of raw land or commercial properties, the buyer should obtain an environmental site assessment to minimize the risk of buying a property that might be contaminated by hazardous waste or materials.

• If the buyer needs financing, the cost and availability of it should be ascertained since that factor alone often times has the most material affect upon the value of the property being sold.

• To avoid overpayment it is often helpful to obtain a simple appraisal for the property. At the very least, the buyer should speak with the town tax assessor to ascertain the assessed value of the property. You can often determine what similar or comparable properties have sold for to assist you in arriving at a reasonable evaluation of the property.

• If you are purchasing a residential or commercial condominium, the buyer should carefully review all condominium documents and should also review the association's budget and operating expenses as well as ascertaining the current and anticipated monthly fees and the delinquency rate. It is advisable to speak with current owners to ascertain what, if any, problems might exist. If control of the association has been transferred from the developer to the unit owners, then it is advisable to speak with the president or a director of the association to ascertain all of the information needed to assist you in making a carefully reasoned purchasing decision.

When buying at foreclosure sale, you should complete your "due-diligence" before the sale, because the contract you sign at a foreclosure sale has no contingencies to your obligation to buy. If, for example, you cannot get financing or title insurance, that does not relieve you from your obligations under the Purchase and Sale Agreement, and should you fail to close, you will forfeit your deposit.

Keep in mind, however, that in most cases, the foreclosing bank completed the same due diligence before making the loan and as a result, we rarely run into any problems that cannot be easily and rapidly resolved prior to the auction itself.

Remember, investigate the property and the availability of financing before you show up to buy at auction, and if you are buying through a broker, make sure your contract is expressly contingent upon all of the items listed above at a minimum. The real estate broker represents only the seller and drafts the Purchase and Sale agreement for the seller's benefit. Buyers should always have the Purchase and Sale Agreement carefully reviewed by an attorney or some other party who is not receiving a commission from the seller.