Top Pros And Cons Of Buying A Foreclosed Home
The competitive real estate market has many buyers looking for the best deal when purchasing a home. For a majority of people, foreclosed homes are a way of getting a great home at a great price. Although these homes have their upsides, they also come with a few downsides. As such, it is important to be knowledgeable about the whole process. Looking to buy a foreclosed home?
Here are the pros and cons that you should consider first:
Pros
- The Ability To Buy Fast And Below Market Price
The main advantage of buying a foreclosed home is the ability to purchase it below the market price. This occurs because those who were part of the foreclosure process are only interested in gaining back any losses that they encountered. If the home stays longer on the market, it may accumulate property taxes, as well as maintenance fees. As such, the home is sold quickly and at an affordable price.
- It’s A Good Return On Investment
If the foreclosed home is still in good shape, then you can make a few necessary upgrades and enjoy a good return on your investment. It is also possible to use traditional financing, like FHA loans and other regular mortgages, to finance your purchase of the home. As the bank or original homeowner is already willing to sell, they will be open to negotiating the price, closing costs, necessary down payment and length of escrow.
- Equity Accumulation
The aspect of equity accumulation is also another advantage of buying a foreclosed home. Apart from buying at a favorable price, equity can accumulate from buying low. This may be about making repairs or having patience, as the neighborhood that the home is found in continues to develop. Whenever you buy under the market value, you will put yourself in a profitable position when you are ready to sell.
Cons
- There Might Be Expensive Repairs
The state of the home is often a big worry when it comes to buying a foreclosed home. Due to the fact that the house was not occupied for quite some time, there is a high chance that some damage was done by previous owners, and pests may have invaded the property. Therefore, if you are leaning towards buying a foreclosed home, just know that it is listed exactly as it is. That means that no repairs were required to improve its condition to make it more suitable for buyers.
- Property Liens
Purchasing a foreclosed home, without doing the proper research, is the worst mistake you can make. You may be liable for some hefty bills, as the new owner. In this case, it may be difficult to acquire financing from a lender because of the distressed state of the property. Also, the purchase and closing could be a very long and tiring process.
- Bidding War
Since foreclosed homes are always offered at a discount, multiple offers are often encountered. In this case, you will face a bidding war for the property, especially in cases where it is auctioned off.
Conclusion
Granted, there are instances where buying a foreclosed home is the best way to get a great deal on a property. However, the negative concerns should not be overlooked. Make sure that you purchase a home that is the right fit for you, well-priced, and does not come with any hidden issues.