When some people think of buying a foreclosed home, they often think of the good deals that can be had.
Whether you are planning on buying your first home or you are looking to invest in the property market, there are a few good reasons why you should consider looking into foreclosed properties.
What is a Foreclosed Property?
Before discussing the pros and cons of a buying a foreclosed property, it is a good idea to define exactly what a foreclosed property is.
Foreclosure refers to the actions taken by a lender in order to get the remaining balance of a loan owed by a homeowner who can no longer afford to make payments toward his mortgage.
A lender has a few options to achieve the above stated goal including revising the payment schedule, auctioning the property, or taking control of the ownership of the property in order to sell it.
Advantages of Buying a Foreclosed Home
Buying a foreclosed home offers a few distinct advantages.
People are enticed to buy foreclosed properties because of the low price. Lenders usually want to recoup their investments and want to sell properties as soon as possible.
This often means that foreclosed properties are sold at prices considerably lower compared to similar properties in the same location.
“Whether you are looking for a family home or a property that you can flip, there are different properties located in good locations at different price ranges.”
Finally, many investors are drawn to foreclosed homes because of the potential to make a sizable profit, especially if these properties are purchased at significantly lower prices.
In an ideal scenario, you buy a property at a low price, make little to no improvements on it, and then sell it at a handsome price when its value appreciates.
Disadvantages of Buying a Foreclosed Home
But before making a serious commitment to buying a foreclosed property, there are a few disadvantages that you need to take into account.
One of the first things that prospective buyers need to know is that many of these properties are in bad shape.
These properties are being sold because the homeowner no longer has the capacity to make payments to the lender and may come with a few financial issues like unpaid taxes and loans that you may have to assume.
Furthermore, most of these properties have been in disarray or even bad condition for an extended period of time. That means you may have to deal with potential issues like pest infestations. It is also likely that the home has been vandalized by its previous owners or outsiders.
If you choose to buy a foreclosed property, you have to have patience. Lots of it. The whole process of buying a foreclosed property is far more complicated compared to an ordinary property. One reason behind that is the sheer amount of paperwork that needs to be done that is often compounded by red tape.
Prospective buyers should also be aware that the financing for foreclosure purchases can be more complicated. In fact, there are some lenders that do not finance the purchase of distressed properties. Some lenders also make specific requirements about the condition of the property that will be bought.
Finally, if you are planning to buy a foreclosed property, you need to be prepared to compete with several other buyers including investors who can pay for a property in cash. This can be further complicated by the fact that demand for properties has increased in recent times.
Should First Time Buyers Consider Foreclosed Properties?
If you have never purchased a property, there are several things that you need to know, including how to qualify a first time home buyer.
One advantage of being a first time buyer, especially if you have sufficient down payment, is that you have an edge over other buyers who can offer a lower down payment.
First time buyers can also fare well in areas where there is less competition and a good supply of foreclosed properties.
Finally, first time buyers can take advantage of lower interest rates currently available.
But again, it is crucial for buyers to weigh the disadvantages of buying foreclosed properties before making a final decision.
Are you ready to Buy a Foreclosed Property?
Before making an initial move to buy a foreclosed property, you have to have a few things lined up.
First, you have to make sure that you have sufficient money available. That goes beyond making payments for the house. You also have to set aside enough money for potential repairs and other expenses.
Next, it is highly recommended that you seek assistance from professionals who specialize in foreclosed properties, including a lawyer.
You also have to consider the fact that closing the sale on a foreclosed property can take a long time to finish. In buying a foreclosed property, you have to act promptly but you also need to be flexible in your timeline for your plans for the property.
If you are buying a property for your family, you also have to be prepared for the idea that you may not be able to move into the house at once.
If you’re considering buying a foreclosed home make sure you know what you’re getting into. Call Golden Eagle Mortgage to help guide you through purchasing your home today!