In a competitive real estate market, many buyers are looking for a great deal on a home purchase. You may be tempted to look at foreclosed homes as a way of getting a great home at a great price. While this strategy certainly has its upsides, it also has downsides. Check out the pros and cons of buying a foreclosure to help you decide if it is a good decision for you.
Obviously, one of the best reasons for buying a foreclosed home is that you may be able to purchase it for below market price. This is because the parties involved in a foreclosure are interested in recouping their losses on the property as soon as possible to avoid the long-term costs of having a vacant property.
Foreclosures are generally real-estate owned properties that are now owned by a lender or owned by the original homeowner who is motivated to sell fast. The longer that the home stays on the market, the more that the lender will owe in property taxes, maintenance fees and more. These properties cost the sellers money, so you may be able to close on a foreclosed home quickly.
If the home is in good shape, you may be able to get it at a good price, make a few upgrades and see a quicker return on your investment than with a market rate home. In addition, you can generally find foreclosures of all home types, from starter homes up to luxury homes, so it is a good idea to not exclude them from your real estate search.
One of the biggest worries when purchasing a foreclosure is the state of the home. The house may have been vacant for a while, allowing pests to infest the property and maintenance to fall by the wayside. Or, the previous owners may have damaged the property on their way out. When considering a foreclosure, it is important to note that often they are listed as-is, so you might not be able to request repairs on the home before purchase.
Foreclosures can sometimes come with strings attached—usually in the form of liens against the property. If you purchase a foreclosure without doing your homework, you can be liable for a hefty bill as the new owner.
While foreclosures may cost less than other comparable homes, it is important to talk to a lender before considering a foreclosure purchase. Sometimes, lenders may not offer loans for foreclosures or other types of distressed properties. In addition, the legal problems that may come with a foreclosure could hold up your purchase and make closing a drawn out process.
Finally, since foreclosures are often offered at a discount, you may encounter multiple offers and face a bidding war for the property—especially if the property goes to auction.
Choosing to buy a foreclosure can be a good way to get a deal on a home, but there are many things to consider before you decide if buying a foreclosure is the right choice for you. However, choosing a discount home isn’t the only way to make home ownership more affordable for you. The NC Home Advantage Mortgage™ with down payment assistance might be able to help you purchase a home that you can afford that doesn’t come with hidden headaches.
For more information, visit www.nchfa.com/home-buyers.