Are you thinking of buying a foreclosure?
Buying a foreclosed home is a little different from buying a resale and while home buyers may be able to get deals on buying these properties, buying foreclosures can be risky. Before you make the decision of buying a foreclosure, it is important to know what you are getting yourself into. Let’s talk about the advantages and disadvantages of buying a foreclosure and what buying such homes involves.
PROS
Lower price and higher profit
Buying a foreclosure means getting the property at a significantly reduced price sometimes up to 20 percent below market price. Buying at a lower price would also mean higher profit if you turn around and sell the home.
Rehab potential
Many, if not all, foreclosures need repairs and renovations. If you know how to rehab a home without having to spend too much money, you can potentially increase its value which in turn would make a sizable profit when you decide to sell the property.
Financing
If you’re buying a foreclosure from a bank or other government-controlled mortgage giant, they may offer you attractive financing options. One example is the closing assistance offered by Fannie Mae to first time home buyers.
CONS
Competition
Because foreclosures can be great deals, they are attractive to investors as well as other home buyers looking for cheaper homes. Competition can be tough especially for those properties in good location.
There are no disclosures
With a traditional resale, you’ll get disclosures from the sellers. With foreclosures, there’s none. The bank will not give you the history of the home nor the problems you might encounter when you move in. You will have to uncover everything yourself, either during the home inspection or through experience after you become the homeowner.
As-Is
Disgruntled people who lost their home from the bank often strip the property bare or damage it, and normally, you as buyer will be responsible for repairs and rehab.
Different process
Unlike in a traditional sale where you receive a careful attention from the seller, with foreclosures, it is mostly impersonal. You’re dealing with a bank so be prepared to wait for a few days, if not weeks, for a response. Expect that bank will also have its own processes. It doesn’t follow the standard procedure used in the local real estate community. It may also have its own contract that protects its interest and they have companies they like to use on their transactions.
The bottom line
Foreclosed properties often offer great opportunity but it could also be a money pit if you are not extra careful. Do your homework and research before making the final decision. Look at the trends in your local real estate market and consult a real estate agent for advice.
Check out the latest Foreclosures on the market today!!!
