Home Buyer’s Guide: Is Buying a Foreclosed Home a Good Idea?
If you’re looking at buying real estate, you need to know how a foreclosure differs from other properties before making a buying decision. Foreclosures are tempting, especially to an investor, because of their potential. Often, these homes are sold for much less than comparable properties. If a seller is willing to pay cash, a bank might lower their price by $10,000 to $20,000 dollars.
You have the option to skip an appraisal, which can save around $450 on average, too. In addition, the process is usually quicker from start to finish than if you were to buy another home on the market. But, buying a foreclosed home isn’t for everybody. There are some important things you need to know about buying this kind of property.
Read on to find out if buying a foreclosure is right for you!
1. One Major Advantage: The Price is Right
One of the most popular reasons for buying a foreclosure is its price. These homes are typically priced much lower compared to others that are for sale nearby. And, these properties can offer excellent opportunities to make a profit if they are in a prime location for investing.
According to real estate professionals reporting on Trulia, foreclosed properties are currently sold as low as 5 to 10% of their market value price. But, this isn’t always the case. In fact, in areas where prices are rising and the market is slim, you might even pay more than the home’s value. You can learn more about how to tell if you’re getting a good deal on a foreclosure by conducting your own online research.
2. Foreclosed Homes are Often Quick Sales
With a foreclosure, buyers often pay cash and purchase the property as-is. This allows both the buyer and the seller to forgo many of the steps that they would otherwise have to take to complete the transaction.
Also, these homes are typically vacant when the sale is made, which means the buyer has the option to occupy the property immediately. When purchasing an average home off the market, sellers often aren’t ready to vacate the home for a month or two.
However, the timeframe might be longer or shorter than you might expect depending on each individual situation.
3. Homes are Usually Sold As-Is
When a home is sold as-is, there’s a good chance it needs extensive repairs or improvements. Often, the main reason for this is that the previous owner is mad they’re forced to leave their home. They often will purposely destroy pipes, windows, walls — you name it. It’s their way of getting back at the bank. For you, this means the home likely won’t be move-in ready when you close on it.
When you buy a foreclosed home, there may not be room for negotiations. Unlike a regular home sale where the seller is willing to work with the buyer, banks just aren’t. Even if it’s not a requirement, it’s a good idea to get a home inspection prior to closing on the property. You might find that the home isn’t worth the price, even if the price appears to be a bargain.
Some do-it-yourselfers might appreciate the challenge of heavy duty home improvements. But, others might not have the time or funds to invest in the work that needs to get done. And, some jobs might demand a professional’s expertise.
4. Financing Foreclosures
Although it’s possible to obtain outside financing to purchase a foreclosed home, it may be more difficult to get bank approval, depending on the condition of the home. Also, if the home is in a highly sought-after area, or being sold at a very low price, you’ll stand a better chance of sealing the deal if you already have your financing in place.
Due to the typically lower prices of foreclosures, some buyers pay with cash. This is usually a preferable option for the owners, which at this point is often a bank. Otherwise, they might require preapproval before entering accepting an offer to buy the home. You can avoid any questions about your ability to finance by obtaining a pre-approval letter from your bank prior to making an offer on a foreclosure. But, this is not necessary if you plan to buy with cash.
The Bottom Line on Buying a Foreclosed Home
If you are interested in buying a foreclosure, there are a few steps you should take. First, research the prices of other homes in the area or ask a realtor to help you determine if the price is fair, or better than the average market price. Then you should get a professional home inspection so that you can accurately assess the amount of work and expense that the home will require.
Before you make an offer, make sure that it won’t be a problem to obtain quick financing, if necessary. A foreclosed home can be a great way to make a return off of a property if you have all of the information you need to make a wise buying decision.
Looking for Money Saving Advice for Moving?
There are more ways to save on your real estate purchases than buying a foreclosed home. In fact, you can save money on buying real estate n practically every situation if you know a few tricks of the trade. Are you planning on an upcoming move and want to get the most bang for your buck? We’ve got good news! If you want more advice for saving money for buying and moving into your new home, we can help. Our top-notch real estate advice can benefit every buyer.
Check out this blog for money saving tips that help you save cash when transitioning from one home to the next!