Search Site
Menu
Risk of Buying a Property at a Foreclosure Sale

 

Client:                           “I’m buying a foreclosure property.”

Attorney:                      “OK, when is the sale?”

Client:                           “Tomorrow”

Attorney:                      “Have you completed any due diligence on the property?”

Client:                           “Well…I drove past the property a couple of times.”

Attorney:                      [after a long pause] “I am going to take that as a no.”

 

What is a “foreclosure sale?”

Typically, when a person says they are buying “a foreclosed property” or “a foreclosure property” they mean they are purchasing a property being sold at a foreclosure sale, which is a public auction of commercial and residential properties (either by the bank, the taxing authority or a property owners association), that takes place at the county courthouse on the first Tuesday of each month. However, buying a foreclosure property can also mean buying a property that has already been obtained by a bank at the foreclosure sale, and the property is now privately offered for sale by the bank.  A “foreclosure property” can also mean a sale that takes place before the property is actually foreclosed upon in what is typically called a “short sale” or a “pre-foreclosure sale.” This article will focus solely on the purchase of a property at a foreclosure sale at the county courthouse.

 

What are the risks?

  • No access for inspection. The potential buyer will likely have little or no access to the property to conduct any type of physical inspection or due diligence. This is particularly true when the owner or tenant is still occupying the property prior to the foreclosure. A buyer may try gaining access to the empty property to conduct a physical inspection, but doing so without the express consent of the owner is not advisable as this is considered trespassing.
  • The property may still be occupied. As discussed above, the property being foreclosed upon may still be occupied when the foreclosure takes place. Though obtaining the title to a property at a foreclosure sale gives the buyer ownership of the property, the current occupants may not be willing to move out since they are likely occupying the property pursuant to a valid lease. In this case, the new owner may have to go through the courts to obtain a legal eviction.
  • Potential decrease in property values. Particularly in residential neighborhoods, a foreclosure on a property can decrease the resale values of surrounding properties, especially when there are a number of foreclosures in close proximity around the same time. While this can be good for the buyer by lowering the purchasing price, those same foreclosures will decrease the value of the property in the short term if the buyer tries to sell the property for a quick profit. The decreased values may also negatively impact the property if the buyer intends to hold the property as a long term investment.
Leave a Reply

Your email address will not be published. Required fields are marked *

Contact a Dedicated Texas Business Lawyer To Schedule a Consultation
Call 281-367-1222 or contact us online to schedule a meeting.

Strong In Action

  • Spring 2019

    The Strong Firm represents borrower in $42.3 million HUD construction loan for multifamily real estate development in Walton County, Florida.

    Read More
  • Spring 2019

    The Strong Firm acts as legal counsel for borrower in $32.1 million HUD construction loan for multifamily real estate development in Conroe, Texas.

    Read More
  • Spring 2019

    The Strong Firm aids borrower in $31.7 million HUD construction loan for multifamily real estate development in Nueces County, Texas.

    Read More
  • Spring 2019

    The Strong Firm represents borrower in the refinancing of a $3.57 million commercial mortgage-backed security for a commercial office facility in Montgomery County, Texas.

    Read More
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  • Peer Rated 2019 Award

Recent Blog Posts

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the Bankruptcy Provisions Therein

Last Friday, Congress passed and President Trump executed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” of “Stimulus Bill”) granting a significant and admirable level of support to the U.S. economy that has been left reeling by the one-two punch of the COVID-19 pandemic and OPEC’s… posturing.  While
Read More
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the Bankruptcy Provisions Therein

Combating Consumer Scams Amid COVID-19

As Texans, we have weathered our share of crises and disaster, although, here in southeast Texas, it’s usually in the form of a hurricane. Times of crisis and uncertainty, such as the current COVID-19 outbreak, tend to bring out not only the very best in people, but also the very
Read More
Combating Consumer Scams Amid COVID-19

Considerations for Commercial Property Owners and COVID-19

The novel coronavirus (COVID-19) has wreaked havoc on the world and our nation, casting widespread uncertainty and hardship in seemingly every corner of the economy. With many commercial tenants in dire financial straits – particularly those who rely upon customer interaction (i.e. retail, restaurant, and entertainment) – commercial landlords are
Read More
Considerations for Commercial Property Owners and COVID-19

Small Business Owner’s Guide to the CARES Act

The U.S. Senate Committee on Small Business & Entrepreneurship has put together the below summary of programs and assistance available to small business owners and certain nonprofit organizations through the Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).  The following information is current
Read More
Small Business Owner’s Guide to the CARES Act
  • Video Vault


    Watch videos done by our legal team to gain a better understanding of your legal needs. Our lawyers give video insight into areas such as Real Estate, Business Law, Mergers & Acquisitions and much more.

Pay Retainer Online

Use our easy-to-use and secure online payment feature.
We accept all major credit cards.

Pay Your Retainer

Contact us

Quick Contact Form