Should I Buy a Foreclosed Home?
There Are Some Things You Need to Consider Beforehand
If you are in the market for a new house, you might have stumbled upon a listing or two for a foreclosed home. Perhaps you are specifically interested in making an offer on a foreclosed home. Whatever your background knowledge of the housing market is, it becomes clear that foreclosures are tempting deals.
You might have found a great deal but wonder if making a bid on a foreclosed house is worth the risks involved. Foreclosed homes have certain reputations surrounding them. Will the house be in good condition? What will the relationship with the current “owner” (oftentimes the original lender) or my real estate agent look like?
At First State Bank, we know you are likely looking out for the best deal on a home for you and your family, so below we answer some of the most common questions related to buying a foreclosed home.
What is a Foreclosed Home?
A foreclosed home is sometimes referred to as a foreclosure property or bank-owned house, home or property. It is also commonly called a real-estate-owned (REO) property.
This simply means the previous owner defaulted on his or her loan and that the home is now the property of the lender—usually a bank. In such cases, the bank is generally trying to get restitution as quickly as possible, so the home is put up for sale—usually at auction—for the market value.
At the end of the year especially, you may see foreclosed homes for sale at a significant discount of their full value.
Is a Foreclosed Home Right for Me?
While going with a bank-owned property might seem like a great deal, it is a good idea to tread forward with caution. Because of the quick turnaround time, the bank might not have updated information regarding the state of the house, which could mean that it is in need of costly repairs.
Foreclosed property acquisition is not for the faint of heart. If you are truly looking to get a good deal on a home for you and your family, it might be worth the time and patience the process takes. However, if you are just looking to quickly flip a house for profit, you might not be playing the right game.
It is generally recommended that you hire an experienced foreclosure real estate agent and/or a local real estate attorney to help you navigate local real estate laws and the process of buying the home. Any mistakes could prove to be a major setback, and your deposit or entire purchase could be forfeited.
And don’t forget: even though the price tag on the home is likely to be low, you should still plan to budget for repairs and renovations when purchasing a foreclosed home. There is no guarantee as to the condition of the home, and many banks do not always have time to inspect and improve the property. Houses can fall into states of disrepair very quickly, and, if the previous tenants did not properly care for it and left in a rush, the burden is likely to fall on you, the new home owner.