A couple more things. First, there are significant differences in process and pragmatics for buying a home that is in the foreclosure process, buying a home at a foreclosure sale, buying in a short sale and buying an REO (actually OREO, which means Other Real Estate Owned - a home in the bank's inventory after they purchased it in a credit bid of the amounts owed to them in the foreclosure sale). It's complex and I won't go into the many distinctions, differences and permutations, except to say that we're doing the subject a bit of a disservice lumping them together here. But this needs to be addressed:
Paying cash will give you no recourse in the event something is found deeply wrong after you take possession.
I'm at a loss to think of a situation where this is so, at least in California real estate practice. This is not a situation in which the seller is taking back paper (lending you the purchase money funds) where such a statement MIGHT have some validity.
It is actually a big plus that you can purchase for all cash. If you are well informed, have reliable inspectors who don't miss problems and are well advised by an experienced and savvy Realtor, that ability may make the critical difference in you getting that truly great deal. Why? Because the banks (selling in the case of an REO or making the decisions in a short sale) are often known to demand performance of a number of things on unrealistically short notice. And your new lender has a process that isn't easy to shorten up, since they want to ensure that their security (the home they will loan on) is adequate to cover what they have in it. One of those things is insistence that it will "appraise" (i.e., that an appraiser of their choosing will confirm that it is worth what you're paying for it). That is often a sticking point in these transactions. And you will be feeling like the timing just can't work between the demands of the bank on the selling side and the bank you're trying to get a loan from. There's a reason a LOT of these transactions blow up (note also that the Realtor doesn't get paid when an escrow doesn't close).
As to recourse or remedies, you may not have any anyway, at least practically. E.g., nondisclosure of material facts is common and the bank will claim it didn't have knowledge like a seller who lived in the property and experienced the problems. You're an average human, and the bank is the 800 lb. gorilla. Many such things you need to have an expert guide you through. But having the ability to pay cash is a benefit, and not something likely to rob you of remedies.
Speaking of which, be advised that suing inspection companies for negligent inspections is almost always a long shot at best that will cost you significant attorneys fees even to pursue. SO, get a reliable, highly recommended and expert inspector. There is no substitute for your inspectors getting it right.
Good luck and welcome to California!
