We’ve all heard that you can get a great deal on foreclosure properties. Do you know what the possible setbacks or potential benefits are? Here's a run through on the process...
Although banks can vary on policy, they often don’t consider foreclosure until a homeowner has fallen 90 days behind on payments. Their primary goal is for the owner to keep their home, but in the event it cannot happen, they will go ahead with foreclosure. Once a house has been foreclosed upon, the bank will work fairly quickly to attempt to recoup their money. Most often, foreclosure properties are sold in as-is condition, meaning they are sold without guarantee and without warranty.
The Possible Setbacks
Foreclosure occurs when the bank or lender has taken back the property because the owners fell behind on payments. Some times the emotional turmoil and anger towards their financial situation may have been taken out on the home, causing a lot of damage. It’s not uncommon to see holes in walls, damaged fixtures, or ruined flooring with foreclosures.
It’s almost a guarantee that when a homeowner can’t afford their monthly payments, they also can’t afford maintenance and upkeep; so new homeowners are typically faced with an extensive list of repairs that have been ignored.
With foreclosures, homeowners often take with them anything of value that can be removed such as window coverings, appliance, fixtures etc. These items have to be budgeted in for replacement by the purchaser.
The Potential Gain
While many foreclosures are in pretty rough shape, there are some exceptions where new buyers only need to do a few minor repairs. Where the gain could be is if the purchase price of the home is lower than the market value of comparable homes in the area. There could be potential for a good return on investment provided the cost of repair and additional expenses don’t exceed resale value of the home.
The Professional Support
By surrounding yourself with experts in the foreclosure process, there is the potential to gain a decent return on your investment. Enlist the support of an experienced realtor who can negotiate the best price.
Hiring a home inspector who can provide a detailed report on necessary repairs. And you'll also want to hire a lawyer to ensure your purchase is protected during the closing process as well.