When a homeowner defaults on their mortgage, the lender has the right to take over possession of the property-which is called foreclosure. The lender/mortgage company will then turn around and sell this property to get back as much money of the remaining loan as possible. Some things to consider before buying a foreclosed home is your homeowner experience and your financial situation. Today we will discuss the pros and cons of buying home that has been foreclosed on.
Benefits of Buying a Foreclosed Home:
There are a couple positives of buying a foreclosed home; the first being that the mortgage company will sell the home for less money than comparable homes, and you may be able to purchase that home for much less than market value. If the home is in good condition, this could be extremely beneficial. Sometimes the foreclosed properties are sold at auctions, so getting a good value for your buck is also possible. Sometimes the buyer will have negotiating leverage when buying a foreclosed home to get the cost below market, and may get funds back to recover cost of repairs.
Risks of Buying a Foreclosed Home:
There are many more risks involved with buying a foreclosed home versus advantages to consider. The first is when a homeowner loses their home, many people will no longer maintain the home, and some even go as far as destroying the home. Also if a home has been sitting for a long time, the home may fall prey to having fixtures, piping, copper stolen from it, so factoring additional costs for repairs, and replacing items may be necessary. When an owner still occupies a property, the lender does not have a clear title so you may end up having to deal with additional judgments, liens, back taxes, that were not originally factored into costs. It is important that you do a title search, and having everything cleared before going ahead with your purchase. Other things to take into consideration is you cannot be as selective with characteristics of the home or location.
Taking these things into consideration should be able to help you determine if buying foreclosed property is right for you, and also know you will have to use a specialized service to find available homes, they are not advertised like a regular home.