What You Can Expect in a Foreclosure Home
Foreclosure homes can provide great value for money, but it can take a little more time and planning ahead before you get the home of your dreams. Know what to expect when buying a foreclosure home, and you'll be more likely to get a great home out of the process.
What Is a Foreclosure Home?
When a homeowner is unable to meet his financial obligations to repay the loan used to buy the home, the bank can take possession of the home through foreclosure proceedings. Once the house has been foreclosed upon, the bank typically resells the property for a price that is at or below fair market value.
Lower Price and Appraisal Value
Many foreclosure homes are a great value in that they are sold below the typical market value of similar homes in the area. However, the appraised value of these homes is often lower too. Damage from former occupants, multiple foreclosures in the area or neglect to the home if it has been vacant for some time can all lead to a low appraisal value, which could make it more difficult to obtain financing.
Get Pre-Approved for Financing
Unless you can afford to pay cash for a foreclosure home, get a letter of pre-approval from your lender before you ever start looking at homes. Foreclosure homes often sell very quickly because they are priced much lower than other homes on the market, and you could miss out if you don't have your financing in place from the start.
More Maintenance and Repair Costs
Many homeowners who lose their homes to foreclosure are angry about it, and they may take out their anger on the home. You may get a great deal on the home, but you could also have to spend much more on repairs and maintenance just to make it nice enough to live in.
Buying a foreclosure home can be a good way to purchase property at a low price, but you must take care when buying one of these bank-owned properties. The process of buying a foreclosure home takes a little more research and effort than buying a non-foreclosure property does, but it can be worth the extra time and effort if it gets you a great deal on a good home.