You can purchase your Dad’s house if it’s been foreclosed on if the bank will allow you to do so. However the banks have very strict rules and your Dad cannot occupy the property as well as being related may not allow you to do so. It will be up to the bank to decide.
If the property is foreclosed on I’m assuming your Dad is no longer occupying the property or soon will be moving out as well as the bank is now on title not your Dad. If you were to purchase the property you should check with the bank to find out if they will allow you to make an offer before you get to far down the road. Your Realtor would be the best to advise you on what the bank/asset management company will allow.
Also if you are a first time home buyer and are looking to get the tax credit better check with your tax accountant if you would qualify as one of the limitation of the tax credit is you cannot purchase a home from a family member. Granted the bank probably owns the property if the foreclosure proceedings have been completed but to me there seems to be a fine line.
I recommend looking a bit further into this before pursuing.
If your dad’s (mom’s, brother, sister, business partner, etc.) house in the “ foreclosure process,” and not yet “bank-owned," the answer is unequivocally "no." You can’t … and shouldn’t buy the home, at this stage.
What this would describe is termed a “ Short Sale." This is where the bank is asked/solicited to agree to accept less than is owed on the loan in order to release the lien and allow the sales transaction to be consummated.
In a short sale, the majority of banks, servicers, investors and mortgage insurance (MI) companies require affidavits of “arms length transaction” from all parties: Seller, Buyer and both their Agents. So selling to a relative in a short sale is, quite frankly, not going to be allowed, at all. And if they don’t require such affidavits (and you want to put one by them), there could clearly be a future claim of conspiracy, collusion, or even fraud ( a “criminal” charge) at some later date. Just don’t do it! The bank is not going to delay foreclosure, in order to determine if you, buying your dad’s house, is an otherwise fair market transaction, they have no choice but to assume it is not. This is one of the immediate short-sale rejection categories for every lender’s initial financial review for a short sale proposal.
I know it’s tough, but either help your dad get current on payments, negotiate a lower-payment “loan modification,” or gently and lovingly help him transition into a new residence which he can afford. No matter what (stay or move), it will be a new season in his life. Help make it a good one. We’ve only got one Dad!
Now, if the home has been foreclosed upon, meaning that the Bank now “owns” the property, you are free to purchase it, as is the general public. They have a fiduciary responsibility to liquidate the asset for the highest and best price for their company or underlying investor. Your money, at that point, will be as green as anyone else’s. The Bank cannot and will not restrict you from purchasing any property that they own.