Pros And Cons Of Buying A Foreclosure
Buying your first home can be exciting, nerve-wracking and confusing all at the same time. One option many first time homebuyers consider is purchasing a foreclosed property. Are the advantages of buying a foreclosure worth the risks involved? Weighing the plusses against the minuses can help you determine whether purchasing a foreclosure is right for you.
Lower Price? Maybe
Your first thought may be that banks are itching to get rid of these repossessed properties and recoup at least some of the money they loaned and, in many cases, you would be correct. However, it is essential to be aware that if the borrowers owed a great deal of money on the home, the bank could actually ask for more than the home is worth. Work with your agent to check the asking price against comparable homes in the area.
There is a good chance that what you see is what you get. Unlike a private seller, banks are less accommodating when it comes to making repairs or concessions for damaged, missing or subpar features in the home. If you can get a great deal and don't mind some DIY TLC, you can probably find a great deal on a fixer-upper.
Competing With Other Homebuyers
Some banks sell foreclosed homes at auctions in which bidders submit their best and final offers and the highest bidder wins. Alternatively, the low price can attract multiple buyers, which can instigate a bidding war. Both of these scenarios can quickly drive up the price, resulting in a less-tempting outcome.
Potential Legal Issues
If the homeowner had any sort of lien on the property at the time of foreclosure, you could be responsible for paying this off or it could drive up the purchase price. Another possible (although less likely) problem you could face is the current residents refusing to leave the home. In the event of the latter, you must take legal steps to evict the residents, whether they are the previous homeowners, renters or anyone else.
The Bottom Line on Purchasing Foreclosures
You can indeed find some deeply discounted foreclosures, especially if you are willing and able to make updates and repairs. The key is going in with your eyes wide open, turning to your agent for advice and preparing to walk away if the deal is not in your best interest.
Performing an advanced search of the MLS listings for your desired area is an easy way to get an idea of foreclosed homes available. Your real estate agent can help you find those that best suit your wants, needs and budget.