Buying a home that has gone into foreclosure can be a great deal for potential homeowners. Usually, bank-owned homes are sold at a bargain price, even if the selling process takes a lot longer. However, the low price tag is not the only thing that should be driving your purchase. If you've never shopped for a foreclosed property before, here are some things you should know before you seal the deal.
1. Sometimes, you can't see before you buy.
Foreclosed homes can go to auctions, and this provides the opportunity to buy it at way below market value. However, these are the types of homes you should typically stay away from if you're looking for a house you want to move into easily. Usually these houses:
- cannot be looked at or inspected before the sale. Sometimes, you get a bargain, but you can also get a money pit because you can't catch things like foundation problems, plumbing issues, or termite damage.
- are bought as-is. You can't go to the bank asking for reparations after you sign on the dotted line.
- require a significant amount of cash upfront.
- have not been maintained after they have been vacated. Neglect can cause things like water damage or gas leaks to go unnoticed.
If you are interested in a foreclosed home that is going to be auctioned off and are not yet experienced with buying auction properties, talk to your real estate agent for more help about how you can tell if the house is worth your bid. With the above disadvantages, it might be best to leave the properties for investors, house flippers, or developers.
2. Using a real estate agent is the best way to make sure you're not getting a bad deal.
Banks can use real estate agencies to market their properties to the public, and this is usually safest for home buyers. Usually, with an agent in control of the property, you can view it more easily and you have someone who can liaise with the bank on your behalf.
3. Set aside money for renovations when deciding your budget.
Unlike home on the traditional market, many banks do not negotiate much on the price of foreclosed homes. They set the price, and potential buyers can take it or leave it—especially because the house is often listed below market value. So, if your home inspection finds an issue like some bad wiring or something else that needs to be replaced, negotiating a lower price because of those issues won't always be a possibility. So, be sure that your buying budget includes a few thousand for unexpected problems. For more information about homes for sale in your area, consider contacting a local realtor.