Foreclosures are up 219% since the start of 2022 across the country.
If you’re looking for a cheap home to move into, you may be considering buying a foreclosure. If so, the truth about buying a foreclosed home will help you make an informed decision.
Here is what you need to know about buying a foreclosure.
How Foreclosure Works
To uncover the truth about buying a foreclosed home, you need to know how the process works. It all begins with a family buying a new home and taking out a mortgage for it. For whatever reason, at some point, they can’t make their payment, and foreclosure begins.
When the lending agent or bank decides to start the process, they deliver a letter to the owners. This is known as a foreclosure start, which begins the home foreclosure process. It can take months for the process to finish, with each state being different.
Throughout this process, the family will be aware that their home is being taken. Once they have exhausted all appeals, the lender takes possession. In some areas, this happens before the previous residents get evicted.
This can leave the problem of removing the old homeowners to you.
Buying a Foreclosed Home
The process for buying a foreclosed home is different depending on how it is being sold. The two most common ways are via an auction or via a real estate listing. There are significant differences in the purchasing process, but the reality is the same.
When you buy a foreclosed home, you are purchasing a home as is. The former owners may not have treated the property right. Towards the end of their ownership, it is unlikely they had the money to perform any maintenance.
Buying a House As Is
What does it mean to buy a foreclosed home as is? It means that you’re accepting the condition of the home, no matter what it is. If you buy it in an auction, there won’t be time for a pre-purchase inspection of the home.
That means you accept the risk that comes along with getting this house at a reduced price. This can be a great deal, but it can also end up costing a lot more money. Some homeowners even sabotage their homes, angry that they are being foreclosed on.
It isn’t always possible to get a traditional mortgage with foreclosed homes. These houses move fast on the market, and people who are willing to pay cash wait for good opportunities. You may not have the time to take out a traditional loan.
There are also requirements for traditional loans that a foreclosed home may not qualify for. These include things like inspections and various maintenance tasks.
The property may have delinquent property taxes that you are liable for if you purchase it. This can get researched, but if you’re moving fast on a good property, you may not have time. You could end up with a bill for thousands of dollars.
One of the problems with foreclosed homes is that they were foreclosed because people couldn’t pay. Homeownership is expensive, and as the money dries up, so too does the home. Taking care of taxes is going to be low on the list when someone is trying to keep their home.
Infestations and Pests
There are foreclosed homes that sit empty for a period of time before they enter the market. Any time a structure sits empty, there’s a good chance that something will use it. That something is often pests, they can be destructive or benign, but you will have to deal with it.
You could encounter rodents, termites, ants, and other insects and creatures in your home. You won’t know until you begin to move in or after the sale. Should you buy a foreclosed home, be sure to have a budget set aside for extermination.
There are other problems that a vacant home can hide. This could be a broken air conditioner or a water leak. If left without repair, a water leak can lead to mold and other structural damage.
There could have also been squatters in the home. People who are homeless will often target vacant homes to live in. You could be ready to move into your new home and discover that it hosted guests.
Something to consider is that once something is not being taken care of, it begins to fall apart. That continues whether it is occupied or not.
By now, you may have decided you don’t want a foreclosed home. If that’s the case, don’t worry, there are some other ways you can get a good price. One of those ways is by purchasing a home from the owner.
When you purchase a home from an owner, you cut out the middleman. This is sometimes called purchasing a home on contract. If you’re wanting to make such a purchase, there are resources that will assist you.
A lot of real estate listings won’t show homes for sale by owners because they don’t offer a commission. That doesn’t mean that there aren’t ways to discover where they are. If you want to move to Chicago and find a home for sale by the owner, find out now.
The Truth About Buying a Foreclosed Home
With all of the downsides and potential pitfalls, you may think no one should buy a foreclosed home. The truth about buying a foreclosed home is that you can make it work. It requires a lot more money than it appears on the face.
If you have the money, time, and knowledge to repair a home, then a foreclosed home might be a good option. Otherwise, you are safer choosing a more traditional method of home purchase.
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