The Pros and Cons of Buying Foreclosure Homes
In some cases, foreclosure properties can be a great deal for home buyers. By doing your research in advance and gaining a full understanding of your responsibilities, you can avoid costly purchasing mistakes.
The biggest benefit of buying a foreclosure property is the price. According to Fox Business, foreclosures sell for approximately 30 percent less than standard properties. If you purchase a home for a low price and make upgrades, you can increase the property value quickly. Buyers of foreclosed properties also have the freedom to negotiate the total closing costs, which translates to increased savings.
Con: Hidden Costs
Although a foreclosure may seem like a bargain, costs can add up quickly. Once you buy a foreclosure, you are responsible for any liens against the home and old debts that are connected to the property. If the old owners are still residing in the building, you may need to pay for a lawyer to help with the eviction process and legal filings. Homes sold at auction often come with associated buyer's fees, which drives up the price further, and since banks may not offer funding for foreclosures, you may need to pay for all costs out of pocket.
Pro: Fast Sale
When a home has been foreclosed on, it is often put up for sale by a bank or another lending institution. Because the bank must pay for taxes and basic maintenance, it may be more motivated to sell the house quickly. As a result, you can enjoy a streamlined buying process. If you purchase through an auction, the sale can be completed in a single day, without the need for negotiation. In some cases, you can complete the sale online from the comfort of your home.
Con: Expensive Repairs
Foreclosed properties come in a variety of conditions and may require extensive repairs. Since many foreclosures do not allow pre-sale inspection, you may not be aware of the problems before you complete the purchase. Properties that have been unoccupied for months or years may have problems with burst pipes, mold, animals or bugs. If the previous owner was unable to make payments, he may not have had money for repairs. Other issues that foreclosure buyers face include damaged roofs, looting and vandalism. The time and effort required to fix the home's problems may offset the cost savings of the initial purchase.
With their low prices and flipping potential, foreclosed properties offer an enticing bargain for home buyers. Before you invest your savings in a foreclosure, however, it is important to understand the pros and cons of the process. Entering into the world of foreclosures with realistic expectations can save you money and frustration down the road.