Given the current economic circumstances, in many cases it is now easier to buying a foreclosed home than ever before. The default rates are climbing for real estate in many areas, even as the home value has declined, which has forced many owners into a situation where they must consider selling in order to avoid financial catastrophe. As the country demographically moves to a post baby boom era, there are also more senior homeowners seeking to sell then there are new, post-baby boomer buyers available, which creates a buyers market for those seeking opportunities.
How to Buy A Foreclosed Home
Approaching a homeowner in distress may be a touchy matter, so it's best to initially contact them by gently offering oneself as a potential buyer that the owner can turn to as an alternative, or 'plan B' solution to their being behind on payments. Many services exists in major cities that lists properties that are going into the default process, which make it easy to review which situations to pursue first. One can also find the properties by going to the public records or county register in your area and research new 'lis pendens' yourself.
One popular scenario is to offer to assist a seller in distress who has already tried to negotiate a mortgage reorganization with the lender, only to find that 'the workout doesn't work out' for them. Once the homeowner realizes that the 'plan A' scenario has failed, they may be more receptive to settling with a buyer who is ready to bail them out by purchasing the property. If negotiating with emotional sellers is not for you, however, your best bet is to purchase the house at auction, or negotiate with the bank afterward, to acquire the repossessed property. Whichever strategy is pursued, you should have a financing strategy firmly in place to pick up the foreclosed house.
Do your homework before buying a property
Like most important purchases, you should do a thorough research on the property. Understand how the entire foreclosure process works, and also attend a few foreclosure auctions to get a hang of the process. Learn about the market value of the property and also about the history of the property.
Advantages
- Foreclosed homes come with a huge discount and you can buy a foreclosed home for around 25% lesser than the market value.
- Since there are numerous projects coming up, the prices of homes that buying a foreclosed home have decreased even more.
- As the home is already built, you can move in immediately.
- You can confidently buy these homes without worrying about the legality of any of the documents as they would have been checked by the bank.
- Most foreclosed homes are quality homes in good residential areas.
- As you are buying a home from a government recognized financial institution or a bank, the seller can be trusted.
- You can complete the entire transaction in less than two months.
Disadvantages
- You do not get any warranty on foreclosed homes.
- As you are buying the property as-is, there may be many repairs and modifications that you may have to make. The previous owner may not have had money to pay his loan payments on time, so he may not have had any money to pay for repairs, either.
- The bank will also not give away any history of the property or the condition of the house.
- The previous owner may have had other debts like property tax or maintenance charge, which you may have to pay if you want buying a foreclosed home.
- Calculating the value of a foreclosed home can be a hard task.
- You may also have to pay utility bills like electricity bills and water bills.
- Banks may not offer you a loan for a home that is foreclosed as there may be legal problems in the property.
- You may have to pay the purchase price of the property only by cash. This can be an issue if you cannot get a loan from a bank.