First, you should read the bank’s “standard” addendum carefully. While the addendum is designed to protect the bank from any claims from the buyer, after the closing, I have seen some that also release the bank from any commitments prior to closing also. Some allow the bank to cancel the contract if they get a better offer. Some even go so far as to waive any requirement that the title be free and clear of liens, requiring you, as the buyer, to assume any back taxes, home owner’s association dues, or even second or third mortgages that might have been missed in their foreclosure process. Also note that even if you are being required to pay for title insurance, that the closing will be handled through the bank’s captive closing agent, who is usually not local.

Two crucial items to insist on in any contract, which your Realtor can handle with a separate addendum, are (1) an adquate inspection period so that you can know exactly what you are buying, and (2) a reasonable opportunity to review and approve the title insurance commitment, and the right to cancel if there are unanticipated liens or similar claims against the property.

A home inspection, and a separate termite inspection, are crucial before becoming legally obligated to close. While not free, the costs are reasonable and would you rather spend $600 to not close on a bad property than lose substantially more by losing your deposit?

Your Realtor can assist you in obtaining an Owner’s and Encumbrances Affidavit (O and E Search) from a reputable local title insurance company. These costs less than $150 and confirm not only who the current owner is, but more importantly, all mortgages, liens, easements and restrictions on the property. Also, if the property is subject to an owner’s association, have your Realtor confirm, in writing, the status of assessments. This way you know exactly what to expect and you and your Realtor, armed with this knowledge, can craft your offer accordingly.

I agree with the writer that purchasing a bank foreclosure can offer a great deal, provided you are willing to wade through the red tape and provided you do your “due diligence” and gather the necessary information. A competent Realtor, experienced in this process, is worth his or her weight in gold!