Buying Foreclosed Homes for Sale?
What Are the Pros and Cons of Buying Foreclosed Homes?
Month: April Day: 28 Year: 2017 Time: 12pm EST
What Are Foreclosed Homes? Foreclosure is one of the methods that mortgage lenders can use to protect their investment when one of their borrowers become unable to make their payments on time. In brief, the process will start with the homeowner receiving a notice that they are behind on their mortgage, meaning that they have no more than a short time to get their affairs in order before their home is foreclosed upon. Once time runs out, the lender will sell the home as it is at an auction, though the homeowner can still stop the process by coming up with their late payments. Should the home fail to sell, the bank will put it up for sale on the MLS through a real estate agent, having become its new homeowner in the meantime.
Regardless, since the circumstances of foreclosed homes for sale are so different from the circumstances of most real estate for sale, it should come as no surprise to learn that buying them is something that comes with unique pros and cons, meaning that interested individuals should make sure to explore them as an option before making a final decision.
What Are the Pros of Buying a Foreclosed Home?
Here are some of the pros of buying foreclosed homes for sale:
- First and foremost, lenders want to sell foreclosed homes as soon as possible, meaning that they tend to be available at lower prices than otherwise possible. As a result, home buyers can buy real estate that would be beyond their reach under normal circumstances, though whether this is a good idea or not is a separate matter.
- On a related note, since lenders want to sell foreclosed homes as soon as possible, home buyers have a lot of bargaining power that can be used to secure better terms. This is particularly true when the lenders have been holding on to the real estate for a while since they will be under even more pressure to sell.
- When a home is sold at a lower price than comparable homes in the same neighborhood, the new homeowner can benefit from increased appreciation, thus putting them in a much better position for the future whether they intend to sell or hold onto it.
What Are the Cons of Buying a Foreclosed Home?
In contrast, here are some of the cons of buying foreclosed homes for sale:
- There is more risk to buying foreclosed homes for sale than other real estate for sale because they are sold as they are, meaning that lenders are not responsible for their condition. Since chances are good that homeowners who could not pay their mortgages could not pay for routine maintenance, foreclosed homes are likelier to have problems that will prove both expensive and time-consuming to fix, particularly if they have been unoccupied for months and months.
- Buying foreclosed homes for sale means even more paperwork than buying other real estate for sale. As a result, home buyers must be prepared to exercise patience when dealing with the additional documents that will have to be filled out. For that matter, they must be prepared to deal with other complications as well, with a prime example being how the bad condition of a foreclosed home can make it difficult for them to secure credit.
Further Considerations
Summed up, buying a foreclosed home can be rewarding, but that reward comes with risk. As a result, interested individuals should give the matter some serious consideration to make sure that they want the pros and are willing to tolerate the cons. Otherwise, they may have to rethink their plans.