The lender that forecloses on a home typically puts it on the market shortly after seizing it. If you are looking for a new home, you may see listings for foreclosed properties. But, before you make an offer, it’s important to learn about the benefits and drawbacks of buying a foreclosed home.
Here’s what you need to know:
The Benefits of Buying A Foreclosed Home
There are several benefits to buying a foreclosed home, including:
- Better Deals
- Clear Titles
Let’s take a closer look at each one of these.
Foreclosed homes are typically sold at a steep discount, which is the biggest advantage of buying one of these properties.
The lenders that own these properties are in the financial business, not the real estate business, so they do not have the tools or resources to manage real estate properties. They want to sell their foreclosed properties as quickly as possible in order to cut their losses. As a result, they are often willing to sell a home for less than its market value.
Lenders are usually open to negotiations as well, so if a foreclosed home is listed higher than expected, there’s no harm in making a lower offer to get a better deal.
Foreclosed properties typically have clear titles. If you are buying a foreclosed home, you should not have not to worry about liens, back taxes, or other issues caused by the previous owner.
The Risks of Buying A Foreclosed Home
The benefits of buying a foreclosed home are clear, but it’s important to understand the risks involved with this transaction, too. Some of the risks include:
- No Inspection Opportunity
- Poor Condition of the Property
Following, we will show you more details on each one of these disadvantages.
No Inspection Opportunity
Buyers that purchase foreclosed homes at auctions are often not given the opportunity to inspect the home prior to buying it. This means buyers could end up spending tens of thousands of dollars on a home they have never seen.
There’s no way to determine the value of the home or assess the repair work that is needed without seeing it first, which is why this is one of the biggest risks of purchasing a foreclosed home.
Poor Condition of the Property
Foreclosed properties are usually not in the best condition. Why? First, the property is often left vacant for months prior to the sale. Leaving a home vacant for this long can lead to a number of problems, including rodent and pest infestations and mold. If the home is in a cold climate, the pipes could also burst as a result of poor maintenance.
The previous homeowner may have damaged the house, too. Homeowners that know they are about to lose their home may intentionally damage the home out of anger.
Some frustrated homeowners choose to illegally remove expensive appliances from the home, whereas others cause more significant damage by pouring cement down the toilet or punching holes in the wall.
You will need to either make repairs on your own or hire a professional to help. If you are unwilling to commit the time or money needed to make these repairs, buying a foreclosed home is probably not the best choice for you.
How to Buy A Foreclosed Home
There are both pros and cons to purchasing a foreclosed home. To minimize the risks involved, it’s best to work with a Realtor® who has experience with buying and selling foreclosed properties.
Experienced Realtors® will know where to find the best deals, how to negotiate with lenders, and what terms to include in contracts to protect their clients. There will always be some level of uncertainty involved with these transactions, but working with a reliable Realtor® can greatly reduce the risk. If you want to reap the rewards of buying a foreclosed home, get in touch with a local Realtor® today to start the process.