During the 2008 recession, many people found themselves unable to afford their mortgages. In fact, 300,000 people a month filed a foreclosure according to a 2010 report. Their homes were foreclosed and are now back on the market. This could be the perfect opportunity for you. The question is – is buying a foreclosed beneficial? Here are the pros and cons of buying a foreclosed home to help you decide.
The Lower Price
Many foreclosures are difficult to sell. Lenders want to get rid of them to make up the money lost on the previous sale, which means they sell them at a discounted rate. If you have a small budget, you could end up with a luxuriously large home because you have opted for a foreclosed property. You'll also have more power to bargain, helping to bring the price down.
This also offers you a benefit in the future. It will be easier to gain financially when it comes to sell, since the market price will increase to the average in the local area.
Regular Mortgage Financing Available
You may worry about how you'll finance a home. With some properties, you need to be a cash buyer. This isn't the case with a foreclosed home. You can go through all the regular financing options, including getting a loan through the bank.
You'll still be able to get all the surveys and buyer reports to make sure the property is worthy of a sale. However, there are some downsides to this.
More Risk of Damages
When people lose their homes, they're less likely to care about the damage caused. In fact, some owners will rip everything out possible to gain some money from the loss or help them start afresh elsewhere. You run the risk of far more damage than you would with a traditionally sold home.
There are also structural and electrical risks due to the lack of care when tearing out appliances and other features. These issues will often come up in surveys and buyer reports, so make sure you get an independent one carried out.
Lender May Not Approve the Price
There are times that you'll find a home pre-foreclosed. This could allow you to carry out a short sale to get a cheaper price and sellers are more motivated to sell. The problem is they're selling at a lower rate than they owe on the mortgage and lenders aren't always willing to give up the money they're owed.
Check that the seller has the rights from the lender. You should also be prepared for the value going up if the lender isn't understanding or willing to give up without a fight.
Buying a foreclosed property is a great option for someone who doesn't have the money to buy a brand new house. When comparing homes for sale, only you can decide if you are willing to put the necessary work into a foreclosed home to make it right for you and your family.