Buying a foreclosed property can be a great option if you're in the market for a new home. While many buyers associate buying a foreclosure with getting a great deal, it can also carry some risk. Before making a purchase, you want to make sure that you understand what you're getting into.
To help you make a more informed decision, let's take a look at the pros and cons of buying a foreclosed home.
Buying a foreclosed property is financially advantageous since you may be able to purchase it at a price that is below the market rate. Typically, the cost of foreclosed homes is about 5% lower as compared to similar properties in the market.
You will find foreclosures in every price range – from starter houses to luxury homes. Those who are looking to upgrade will find this option appealing. If you are looking for a bigger house or a property located in a more desirable neighborhood, this can work to your advantage.
Condition of the property
One of the biggest drawbacks of buying a foreclosed home is the lack of information about the property. For one, sellers are not allowed to hire a professional inspector to assess the property's condition. Although the house may appear great on the outside, there may be some serious issues hidden behind its walls or below its foundation.
You need to prepare yourself for a lot of serious and costly repairs if you intend to purchase a foreclosed property.
If homeowners could not make payment after a certain amount of time, the house would be auctioned off or sold in the market. Current inhabitants can also be a significant source of stress, especially if they refuse to vacate the property. Some may even take out their frustration in the house.
As the new owners of the house, you might become responsible for any debt connected to it. That includes the home equity line of credit, construction loans, or tax obligations.
While foreclosed properties may seem like a great deal, make sure that you weigh the pros and cons before signing on the dotted line.
Any house that has been sitting idle for a long period of time will develop some issues. For your peace of mind, you may want to consider hiring a home inspector to help you get a better understanding of the property’s condition. This may come at an extra expense, but it will keep you from falling into a money pit.