Consider the Big Picture before You Buy a Foreclosure
Have you ever heard the expression that someone can go broke while they
try to save money? This may be an old joke but it could very well turn
out to be true when you jump into purchasing a foreclosure.
A foreclosure often seems like a good deal to many people. On the
surface, it certainly appears to be. Many foreclosures can be purchased
for well below market value. If that is all you consider, at first
glance, it could seem that you are really getting a good deal.
The mistake in buying a foreclosure is making the assumption that the
price is low enough for you to be purchasing a real bargain. Troubles
arise further when you do not take into consideration the budget that
may be necessary to rehab the home if that proves to be necessary.
This is not to say that all foreclosed homes need rehabbing. That said;
however, a great many of them do. This can happen for a variety of
reasons. In some cases, the home owners simply may not have had the
funds to make necessary repairs to the home and maintain it as needed.
Think about it. If the homeowner was not able to stay current on their
mortgage payments, there is a very real chance that they did not have
adequate funding to maintain the home either.
In addition, there is the reality that while a great many homeowners do
take price in their homes there is a percentage that would rather
destroy a home when they realize they are losing it to foreclosure than
simply move out gracefully. Buyers who have purchased foreclosed
properties have found out the hard way exactly what a petulant homeowner
can do to the property before they are finally evicted. It is not
uncommon for homeowners to sell every valuable appliance and fixture in
the property or even to actually vandalize the home.
Also, when a home has been foreclosed upon it may sit vacant for a
period of time. These homes are attractive to not only animals, insects
and mold but also squatters as well. Within even a short period of time
a great amount of damage can be done to a vacant home.
Finding foreclosed properties are not difficult. Stay up late any night
and you will find a deluge of infomercials touting the benefits of
foreclosed properties and have you can take advantage of these bargains.
Numerous online companies have gotten into the game as well and are now
offering list of bank owned properties for sale.
Keep in mind that if you truly are interested in buying a foreclosed
property, you do not necessarily need to pay for these types of leads.
In most cases, real estate agents are hired by banks to place the
properties in the
local multiple-listing service. By contacting an
agent, you can ask for a search to be performed in your local MLS at
absolutely no charge.
If you
find a foreclosed property that does interest you, do take steps
to discover as much as possible about the property before you make an
offer. An inspection is an absolute must on a foreclosed property.
Remember that you may not be able to see all of the problems and damage
that could be present. An inspector’s report will not guarantee a
reduced price, in fact most banks won’t reduce a price on the basis of
an inspector’s report because they must recover the amount of money they
have in the property. That said; however, an inspector’s report can help
you to understand the type of investment you are facing.
Taking advantage of a title insurance property is also important when
buying a foreclosed property. A title insurance policy will protect you
in the event that there are old liens on the property, which very well
might be the case with a foreclosed property. You might even consider
asking the bank if they will include the title insurance policy as part
of their closing costs. They may or may not consent; but it doesn’t hurt
to ask.
Finally, keep in mind that it can take longer to close on a foreclosed
property. The bank which owns the property is most likely not located in
the same town, or even the same state, as the property itself. This can
mean delays when you are negotiating terms for the property.
By taking the time to educate yourself and research the property, you
will stand a much better chance of knowing exactly what you are getting
into when purchasing a foreclosed property. This way there will be no
surprises down the road, turning your ‘bargain’ into a real money pit.
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