Before buying a foreclosed home is one that has been seized by the bank and put up for sale by the original loan provider. A home with a “foreclosed” sign on it is under ownership of the bank.
There are plenty of reasons why a home might be in foreclosure, including bankruptcy, insurmountable debt, drastically declining home prices, job loss, or maintenance problems that are too expensive for repair.
Buying a home in foreclosure is much different than buying a standard home. If you’re thinking about selling your home and purchasing a home in foreclosure, here are a few things to consider.
Benefits of Purchasing a Home In Foreclosure
Few Title Concerns
Whenever you purchase a home from a homeowner, you won’t be sure if the title is clean or not. A homeowner might have liens or back taxes on the home, which will force the cancellation of the home sale. However, when you purchase a home in foreclosure, the bank will clear the home title so that you don’t have to worry about it.
Potential for Renovation
Banks are typically not willing to make renovations or repairs before selling a foreclosed home. That is not to say that any rules exist which tell banks they can’t take care of any necessary repairs. If you’re looking at buying a foreclosed home that has been on the market for a bit, it is possible to convince the bank to make necessary repairs for you.
One benefit that you can’t deny is the fact that homes in foreclosure are almost always less expensive than other homes in the region. Lenders price homes in foreclosure and they must sell the home to make a profit.
Disadvantages of Purchasing a Home In Foreclosure
Greater Maintenance Concerns
If a homeowner knows that his or her property is going into foreclosure, then they have no reason to take care of it. Why would a homeowner spend money to fit a problem if they won’t be able to keep their house anyway? Some homeowners intentionally destroy foreclosed properties, leaving new buyers with the responsibility of fixing things.
One course of action that many banks take is selling a foreclosed home at a sheriff’s auction. In the case of an auction, you may have to pay full price in a bid to take deed control.
Just because a home is legally in foreclosure does not mean that there is no one currently living on the property. The reason foreclosed homes often attract squatters is that they are unoccupied for many months or years before anyone takes action. In the case that you purchase a home in foreclosure that has a squatter inside, you can’t simply tell them to get lost. Even if they don’t have a claim to the home, you must legally evict them.
Legal evictions can take a lot of time and costs thousands in legal fees.
Whether or not you will successfully purchase a foreclosed home in good condition without any problems is completely dependent on the property. Take caution and make sure to consider all of the pros and cons before making a final decision.