Buying property is expensive even for the affluent. Real estate is a huge investment, and for the average person looking to purchase a home, it may be the largest acquisition you’ve ever made. With the price of housing continuing to rise along with inflation and the cost of living, many families are seeking ways to avoid excessive spending when purchasing a home. Buying a house that has been foreclosed on can seem like a great idea for those weighing their options in the housing market. But is it?
There are a lot of opinions when it comes to buying a foreclosed home. Many won’t risk it, but others don’t see another option when it comes to investing in a house. So what is the truth about foreclosed properties? What are some of the factors that need to be considered before making the venture to purchase a foreclosed home?
Why Buy a Foreclosed Home?
On the whole, the potential for a discounted price on a house is usually the main reason people want to buy a foreclosed home. Usually, foreclosed homes are priced below market value or at least at a considerably lesser price than other properties in the area. The reason a foreclosed home would be cheaper is that the lender wants to pass off the property, and sell a home fast. This is due to the original mortgage holder being unable to pay the loan they took out to purchase the house, resulting in the foreclosure. At this point the lender has to foot the bill, so to get the property out of their hair they will mark down its price for a faster sale.
Why Not to Buy a Foreclosed Home…
Sometimes, foreclosed homes can be unoccupied for lengthy periods of time. This may result in a lack of upkeep and even damages from vandals, squatters, bad weather, pests, and the normal depreciation of a structure over time. Foreclosed homes left unoccupied could even have major structural problems or issues like water damage due to poor maintenance. If there is no one living in the house, pests like termites can easily take up residence and cause damage that may go unnoticed until someone is ready to buy. When this is the case, a house may have an even lower price to make up for it as the new buyers will have to deal with the problems themselves – and figure out how to get it insured.
Another thing to consider when purchasing a foreclosed home is that you may not get the mortgage you were expecting. As just discussed, foreclosed homes can come with a myriad of issues – this could exclude the home from certain loans, at least until the damage is resolved. There are other financial burdens that may come with a foreclosed home as well, such as an IRS tax lien if you’re in the US, or paying for a lawyer if you end up dealing with lawsuits such as ejection actions (the sometimes necessary legal process to remove a previous tenant from the property).
Keep in mind that we have come nowhere near including all of the potential issues that come with purchasing a foreclosed home. The topics we have discussed are just some of the scenarios that you should be aware of if you are considering this route of homeownership.
Cheap Doesn’t Mean Easy
Although a foreclosed home may seem like a great option due to its low selling price, there are a slew of other factors that could make the purchase risky. If you are considering buying a foreclosed home, be wary and always investigate the other problems a house might have. Remember, sellers are highly motivated to close on foreclosed homes in many instances – you don’t want to be misled in the excitement of a seemingly good deal.
Foreclosed properties can move fast on the market, and you might feel pressured to make a decision immediately. Don’t do this! You never know what problems are lurking hidden to the eye when it comes to a foreclosed property. You must also consider situations such as lengthy and complicated approval processes and issues with securing insurance.
A foreclosed home can be a huge advantage or a mega misstep, depending on how sound the house is. Be sure that you inspect it totally before making any decisions on buying, and figure out what the situation is with the last owner: if they haven’t fully vacated the property or are dealing with the emotional situation that resulted in being foreclosed upon, you might have some unexpected conflict on your hands. A foreclosed home can be the opportunity – or the nightmare – of a lifetime. Always do your research, tread carefully, and don’t be afraid to seek the advice of a professional home buyer.