Easy Steps to Buying a Foreclosure Home without Breaking your Budget
The thought of buying a foreclosure home can be exciting as well as
somewhat frightening. On one hand there is the potential to purchase a
home at well below market value. On the other hand, there is the
potential to find yourself facing more expenses than you had planned on
through unforeseen repairs and even legal impediments you never
expected.
One of the first things to consider when thinking of purchasing a
foreclosed home is whether the area you are considering buying in is
interesting. This is even more important if you buying as an investment.
It is always a good idea to research property sales in that neighborhood
for at least the last five years to determine whether property values
have appreciated so you will know whether it is worth it to make an
investment in that neighborhood. If property values have been unstable
during this time or have taken a significant decline, you might want to
re-evaluate whether you really want to invest in that neighborhood.
Furthermore, you should do a bit more research and find out what the
cost will be to insure that home, particularly if it is located in an
area that is prone to hurricanes and/or tornadoes. The cost for
insurance has significantly risen in many of these areas in the last few
years. Otherwise, you might find yourself purchasing a home that seems
like a bargain only to discover you cannot afford to insure it or that
you simply cannot obtain some types of insurance, such as flood
insurance.
It is always a good idea to be prepared in advance for possible repairs
that will need to be done to the home. Most people lose their homes
through foreclosure because they did not pay the mortgage. This likely
means that they either could not afford to handle or did not care to
handle maintenance and repair issues. A foreclosed home might only need
a few cosmetic repairs, but it could also need serious and expensive
repairs as well so do not overlook these costs when figuring your
budget.
Never assume that you will be the only person bidding on a home. There
will likely be other bidders and many of them may be professional
investors who specialize in restoring foreclosures and reselling them
later. Take the time to research foreclosure sales in that area so you
can understand what to expect from a successful bid.
When purchasing any home, it is important to make sure that there are no
problems with the title prior to completing the purchase. Find out in
advance whether there may be any types of liens that may be associated
with the property. In some states you may become responsible for those
liens when you purchase the property and depending on the amount of the
lien, you could find yourself facing significant additional costs. You
should also try to find out whether the original homeowner has any
pending lawsuits. If there are any pending lawsuits this could
potentially delay your ability to actually take possession of the home,
which could result in additional costs. It is always better to be
forewarned.
Are there any occupants in the home at the current time? If so, you may
face expenses related to evicting them. Original homeowners do not
always go quietly when their homes are foreclosed upon. In some cases,
foreclosed homes are inhabited by tenants who know nothing about the
foreclosure. The eviction process can be expensive and time consuming.
Find out ahead of time so you will know what to expect.
Do your research and know in advance whether the homeowner has any
rights regarding a redemption period. In some areas, the original
homeowner is granted a time period during which they can redeem the home
within a certain time following the auction if they pay the remaining
balance. If you attempt to make any repairs during this time and the
homeowner does redeem the property that is money that will be lost to
you. In the event there is a redemption period in your area, make sure
the home is really yours before you attempt to make any repairs.
Finally, determine how much you can reasonably afford to bid on that
property and still keep to your budget, including possible extra costs
such as repairs and legal expenses. Do not allow yourself to become so
caught up in the heat of the moment as bids begin to escalate that you
blow your budget. If the bids top what you can afford to spend, bow out.
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