What You Should Know Before Buying a Foreclosure
Who doesn't want to save money when they're ready to buy a house? A foreclosed house can appear to be an attractive option. There is no doubt that foreclosed homes sell for less, sometimes much less, than homes listed and sold on the open market by real estate agents and owners.
Unless you're a professional real estate investor, it can be difficult to purchase a foreclosed property. Some foreclosed homes have so much damage that the repairs required to make them habitable quickly deplete any savings on their sales prices. Plus, you'll be competing with others who make their living by buying, repairing, and selling foreclosures.
As you can see, buying a foreclosure can be a huge challenge. Here are some tips you should know before buying a foreclosed home…
Foreclosed Homes Come With Risks
While a foreclosure is a profitable investment, it also comes with the previous owner’s problems. Here are some of the most commonly seen problems:
Financial Risks
Outstanding debts such as back taxes and liens are frequently attached to auction properties. As a result, an otherwise desirable home may be subject to further costs. Before the buying process can begin, any outstanding debts must be satisfied.
This primarily applies to properties that are being auctioned off. Before reselling a property, banks pay off any liens attached to it.
Physical Risks
Keep in mind when buying a foreclosure that the risk may greatly exceed the potential reward.
If the home is still being occupied, it may be poorly maintained. If the people can’t make the payments, they could well be falling behind on maintenance and repairs.
Some people facing foreclosure are enraged, and they may take out their frustrations on their home before the bank repossesses it. This could mean taking appliances, light fixtures, and any other valuable pieces of the home upon departing.
Another thing to consider is if you buy a foreclosure at an auction, you won’t get the opportunity to inspect the inside, and you are buying the home sight unseen.
Foreclosures Attract Competition
When dealing with desirable foreclosed properties, increased interest and competition is unavoidable, not only from potential occupants but also from investors and professional house flippers. Foreclosed homes priced competitively can attract many offers quickly, resulting in a bidding war, which can turn a bargain into a costly investment.
Purchases of foreclosed homes quite often fall through, so you could potentially see your desired property appear back in the inventory if you check periodically.
Foreclosure Purchases Can Be a Long Process
The closing of a foreclosure typically requires additional documents to be completed. On top of that, response times between the bank and other parties involved with real estate-owned properties can be pretty slow. You may have to wait longer than you’d like after putting in a bid on a property as well, especially if the bank is processing many other requests.
If you intend to finance the purchase, you should get a mortgage pre-approval. It is likely to quicken the process.
In Conclusion
Foreclosed homes can appear very appealing on the surface. However, costs can be highly unpredictable, and underlying damage may render a property unmarketable. Some people may reconsider buying due to the lengthy process, while others may be turned away by the high demand for attractive foreclosed properties.
Foreclosures can sometimes wind up being incredible deals. With all of this being said, our Realtors at 316 Realty Group are more than willing to assist you in the process. Reach out to us today and let’s get started!
