Is Buying a Foreclosure a Good Idea?
Initially, the thought of buying a foreclosure property seems great because most people equate the word “foreclosure” with “bargain price.” But a buying a foreclosure can be a complicated process and it often involves taking a certain amount of risk that is not normally required when purchasing a property that is not in foreclosure.
It is absolutely possible to purchase a foreclosure property for less than it would cost if it were for sale by an owner. When a house is in foreclosure, it means it is owned by a bank. Most banks do not want to hold on to foreclosure properties any longer than necessary. Therefore, they are often willing to sell a foreclosure house for less than market value just to get rid of it. But banks are not in the business of giving foreclosures away for free. You will still have to pay… just probably not as much.
But buying a foreclosure comes with certain potential complications. For example, the condition of a foreclosure property is often unfavorable. This means a significant amount of money might be required to repair the house to make it livable. Also, there is often tough competition when it comes to buying a foreclosure property that is in a desirable location. This can lead to bidding wars.
Things to Keep in Mind When Buying a Foreclosure:
1. If you are inexperienced at buying foreclosure properties, then try to avoid the auction setting. When you bid on a foreclosure at an auction, you lose the ability to have the house inspected. Basically, you are buying a house based on where it is located and how it looks from the outside. You never know what type of damage is on the inside and how many thousands of dollars of repairs it needs. Foreclosure auctions are very risky.
2. Make sure you are really getting a good price on the property. Remember: just because a home is listed as a foreclosure does not mean it’s priced any lower than the house next door.
3. Investigate and arrange your Mortgage Rate Quotes options prior to looking at foreclosure properties. Many lenders will not extend loan offers on homes that are listed as foreclosures if they are labeled as “distressed.” The overall condition of foreclosure properties may play a role in whether or not a lender will approve a loan.
The real estate market in the United States is showing signs of true recovery, but there are still many foreclosures occurring in every state, every month. There are certainly excellent opportunities to purchase foreclosures at discount prices. But before you set your mind on purchasing a foreclosure, make sure you understand the complexities involved. Utilizing the help of a real estate agent who is experienced at buying foreclosure properties makes the process much easier. A real estate agent can also assist with bank negotiations. Additionally, a real estate agent may be more aware of available foreclosure properties before they officially hit the market. Buying a foreclosure is a risky proposition, but it is a transaction that can be potentially favorable for the buyer. If you’re willing to take the risk, you might very well come out ahead!