A foreclosure is when a lender attempts to recover the balance of a loan they had previously had issues with a homeowner who no longer can afford to make payments on their mortgage. The lender has several options, such as revising the schedule to make the property more affordable to the owner or putting the house up for auction. If you are thinking of investing in a property at a lesser cost during foreclosures, click here and feel free to ask anything you have in mind.
In this lists you will find some of the pros and cons you are dealing with when trying to purchase a foreclosed home:
- Bargaining power: A prospective buyer can use the bank´s possession of a foreclosed home to their advantage. The truth is that the banks and financial institutions usually want to rid themselves of foreclosed homes quickly for the most reasonable price. So the longer the bank has held the property, the greater the odds that they will consider lower offers.
- Discounted price: These properties have the potential of being marked down from other properties in the same area. This particular circumstance can create the opportunity for someone to purchase a property with a reasonable discount, abling them to buy a property that otherwise would have been unavailable to them.
- Appreciation potential: If the foreclosed home is sold for less than what similar properties on the same street are worth, the increase of the buyer´s percentage could be greater if there´s a remarkable increase in value for every house in the neighborhood.
- Unpredictable costs and damages: When foreclosures are placed on the market for sale, banks do not demand any responsibility for the current condition of the property, and they will not make any repairs before it´s sold. For that, you would need to contact a home inspector to reveal potential problems with the house and also a contractor to provide repair estimates for the buyer.
- Slow process: Buying a foreclosed home sometimes mean lots of paperwork. Foreclosures have some additional documents that you need to complete to prepare for the closing, and most of the cases is not always that timely. Any response from the bank and other involved parties could be slow and seem like an eternity for the potential buyer.
- Increased demand: Increased buyer competition and interest are inevitable when dealing with excellent foreclosed properties. When homebuyers and even investors identify these attractive deals, several offers can come quickly turning the deal into a bidding war.
Foreclosed homes can look tremendously appealing, and costs can be unpredictable and underlying damages can make a property undesirable. On the other hand, they can turn out to be and incredible deal, paying less make having an outstanding price appreciation more achievable for buyers that have the initiative of selling the house in the future. However, it depends on what you have in mind whether to buy a foreclosed home or not. If you decide to buy a foreclosed home here is a video with a few tips on how to buy one.