Are foreclosed home buys a good deal or a potential pitfall?
Is buying a foreclosed home still a good deal in the current market? There are several pros and cons to consider when buying a foreclosed property that we shall examine in some depth here.
The positive aspects of buying a foreclosed home are undeniable. Anytime you can get a home for a substantially reduced price, it is a great value. You can save between 10-50% on a foreclosed property depending on the condition and location of the house. The equity built into the home can be used as financial leverage. This means that upon purchasing the home, you have equity built in that could lead to a home equity line. This gives you cash to use fixing up the home or cash to use for whatever.
Another positive factor is that you can get an upgraded home that you may not be able to afford new. The lower sale price of a foreclosed home can give homeowners the opportunity to have upgraded appliances and other upgrades that they may not be able to afford on a new home. Larger garages, larger yards and better neighborhoods are also what are offered by some of the larger foreclosed homes.
The currently low interest rates also make purchasing a foreclosed home a good deal right now. For those who were waiting for interest rates to go down to buy vacation property, now is a good time. The interest rates are really low and there are so many foreclosures on the market that the selection and good price would present a great value for the buyer.
There are some negative aspects to purchasing a foreclosed property. The process of buying a house is fairly complicated. It is time consuming to wait on an approval from the seller, who is usually a bank. The time period to buy a foreclosure can be as long as a year depending on the bank involved. Each bank operates their REO department differently, which is why the periods to close a foreclosure vary.
Another negative aspect is that foreclosed homes are typically sold “as is”. Most banks will not make repairs to foreclosed properties or even have them inspected. Their goal is to transfer ownership to someone willing to pay their price, which is why foreclosed homes usually have equity already built into them. To make sure that you don’t get stuck paying for serious repairs, make sure to get an inspection from a certified home inspector. The main areas that should be in great condition to make it worth it to purchase a foreclosure are the foundation, the roof, the HVAC system, the pipes and the electrical wiring.
You can get a great deal by buying a foreclosed home, but there is some degree of risk. Make sure that a qualified home inspector reviews the home inside and out before making such a large purchase. Make sure you are getting a sound home with equity built in. You should also be prepared to wait for some time period for approval from the bank. As long as the house is sound, a foreclosure can still be an incredible deal in the current market.