How to Write a Foreclosure Contract

Buying foreclosure property can be a wise investment for you. You can purchase foreclosure property at three stages, which include directly from the owner who defaults, at a foreclosure auction or from lenders such as banks. Regardless of the option you pursue, you must write a contract as a legal agreement for the purchase of the foreclosure property. Writing a contract not only serves as a first offer to purchase but also protects you from legal claims after purchasing the property. It is advisable to work with a real estate agent or an attorney for guidance if you are a novice in foreclosure investing.

Things You'll Need

• Bank statements
• Prequalification letters
• Attorney or real estate agent
• Standard contract form

Instructions

1. Find out all the details of the property by consulting with a local real estate agency or by inquiring from the owner of the property. Ask for details such as the name of the seller, address and telephone contacts. These details might not be available in the public records.

2. Carry out a home inspection after finding the property that you are interested in. Do this by visiting the property and checking out its general condition and any repairs that may be required. Consult a local home inspector to provide you the estimated cost of repairs and keep a record of these costs to help you in making your offer in the contract.

3. Conduct a title search to find out about the financial condition of the property by searching public records online. Use public record search portals for real estate such as RealtyTrac to find out about any liens and pending taxes on the property. Note that liens and pending property taxes will increase the purchase price of the property.

4. Contact the seller and inquire which documents are required to accompany the contract, especially if the seller is a lending institution. Gather documents such as bank statements and prequalification letters from your bank stating approval for a loan taken to purchase the property.

5. Obtain a standard contract form from a local attorney or a real estate agent to begin writing the contract. Note that real estate purchase contracts are usually pre-printed and all you have to do is fill them in. Keep in mind that the foreclosure contract is an "as-is" contract, and your offer cannot ask the seller to incur the cost of repairs---the property is sold as it is.

6. Fill in the contract by providing information that includes the full legal description of the property including physical address, the name of the owner or seller and the name that will appear on the property deed upon purchase (your name). Indicate the purchase price you are offering, how long this offer is valid and the expected date of closing the deal. Write down the responsibilities of the seller and buyer with regard to what each one will pay for as a condition of the purchase. Sign and date the contract.

7. Attach copies of your prequalification letter and bank statement as proof of funds to the contract. Ask the seller to sign the contract and leave these documents with him to read through. Wait for a reply from the seller who will either agree with the contract or add an addendum to the original contract as additional conditions of the sale.

8. Read the addendum thoroughly before assenting to the final contract. Negotiate with the seller any aspects of the contract and addendum that are not agreeable or need clarification. Sign the final contract if an agreement is reached.

References

• Active Rain: Writing a Winning Contract on a Foreclosure
• Realtytrac: How To Buy Foreclosures
• Foreclosure: Document Center
• Bankrate: 5 Tips for Buying a Foreclosure
• Naples Guru: Naples Real Estate; Placing an Offer on REO Bank Owned Foreclosure Property for Sale in Naples, FL
• Credit Consumer Counseling Services: First Time Home Buyers Guide; Writing a Real Estate Contract

Resources

• Bank Foreclosures: Negotiation Tips for Buying Foreclosure Home