After reviewing your finances, you've decided your not quite ready to buy a home – that is until you talk to your friend who raved about the money they saved purchasing a foreclosure. However, before you start down this path, it's important to note that purchasing a foreclosure, or bank-owned property, is much different from buying a home through more traditional avenues. Here are a few of the most common pros and cons of purchasing your first foreclosed home:
Pros of Purchasing a Foreclosure
The process of purchasing a foreclosure might seem complicated, but there certainly are many benefits to all this extra effort:
The Price – According to Kiplinger, it's not uncommon to save 20 percent to 40 percent off a home's appraised value, if you purchase it directly from the bank. This will open up several doors for you, and allow you to purchase a larger home, or one that is in a more desirable neighborhood.
The Risk, and The Reward – If you're considering purchasing a foreclosure at auction, in many states you're not allowed to see the inside of the home. However, if you take a chance, you might be surprised at what you get.
A Very Motivated Seller – There are many stages in the foreclosure process, and in an effort to save money and move on with their life, many sellers try to get out from underneath their mortgage as quickly as possible. This means the seller will be very motivated to unload the property, which could save you thousands. In addition, the seller might also be willing to offer a few extra perks, such as multiple repairs or cash for closing costs.
A Chance for Appreciation – If you're able to purchase a home that is in good shape for well under the appraised value, and put a little money into the property, you'll then raise the property's value much more quickly. This could allow you to resell the home, and purchase another foreclosure!
Buyer Beware
There are several advantages to purchasing a foreclosed homes, but there are unfortunately, several pitfalls, as well. Here are just a few:
The Bank Runs the Show – Purchasing a foreclosure means you're dealing directly with the bank, which can make for a very complicated and drawn-out process. This could mean extra paperwork, extra time and in the end, there is no guarantee the bank will accept your offer. In addition, dealing with the bank can seem very impersonal, which might turn you off to the idea of purchasing a foreclosure all together.
The Property is Sold "As Is" – When purchasing a home through more traditional methods, you can negotiate with a seller to perform repairs, and this is also true if the home is in pre-foreclosure. However, if the bank owns the property, they will not give you an inch, and you'll have to purchase the home "as is."
A Very Unhappy Homeowner – It's not uncommon for previous homeowners to take whatever they can – from the appliances and fixtures to wiring and plumbing. In addition, if the homeowner wasn't happy about the foreclosure, they can also do some serious damage, and you may not know the extent until the final paperwork is signed, and you're the not-so proud owner of that foreclosed home.
Although there are several advantages to purchasing a foreclosed property, it isn't for everyone. Before taking on this process, make sure you know exactly what you're getting into. If you're not sure where to begin, talk to your real estate attorney or a real estate agent about what exactly is involved with purchasing a foreclosure. You can also check out the site here or similar ones for more real estate info.
Share13 July 2015
Too many single people assume they don't need to plan their estate. My brother fell into this category, and his unexpected passing left our entire family struggling to deal with his home, belongings, and financial accounts. It took nearly three years for the courts to set up a deal because he left no paperwork detailing how he wanted his estate divided. The situation immediately convinced me to work on my own estate, even though I'm still in my early 30's and don't have children or a spouse to worry about. Since it's a little harder to pick beneficiaries and estate managers when you're single, I collected the resources I used for making my own decisions and decided to publish them here on my blog. Use these resources before talking to an estate planning attorney so you're prepared for making hard decisions.