Have you ever considered buying a home in foreclosure? There are over 600,000 homes in the U.S. that are in some stage of foreclosure today.
Whether you’re a first-time homebuyer or you’re looking for an investment property, a foreclosed home is a good option worth considering. Check out these ten things you should keep in mind when buying a foreclosed home.
1. Possible Issues With the Current Owner
A risk of buying a foreclosed home is running into issues with the current owner. If you’re buying a home at a foreclosure auction, there’s the potential of angry residents. If you have to evict them, they may retaliate by trashing the home or vandalizing it.
2. Get Pre-Qualified
If you’re going to be in the market for a foreclosure home, it’s recommended that you get pre-qualified. The market for foreclosure homes is fast-paced, so if you have a letter of pre-qualification then you will have a leg up on some of your competition.
If you are wanting to know how to buy a foreclosed home with no money, you may be able to get an FHA loan as a first time home buyer. Getting pre-qualified and knowing how to find foreclosures will be very beneficial to you.
3. Buy From the Bank
It would be best if you buy from the bank. This is a must easier process because the bank takes over the property liens. They hire a real estate agent and you can go through the agent just as you would any other house that you’re interested in buying.
4. A Home Inspection Is a Must
A home inspection should be a non-negotiable when it comes to buying a foreclosure. It will cost you to have this done, but it’s definitely worth it. A professional home inspector will come in and tell you all the issues regarding the structure and property.
5. Foreclosure Auctions are Sight Unseen
If you’re planning on going to a foreclosure auction, you should know that these auctions are sight unseen. This means that you won’t be able to take a tour of the home so you won’t be able to see any possible issues inside the home.
6. Prepare to Spend on Maintenance
Foreclosures are generally sold “as is”. This means that if there are any maintenance issues, it will be your responsibility to take care of them. The bank won’t deal with any maintenance issues.
Once you get these issues resolved, you’ll be able to make the house feel like a home.
7. The History of the Home
You should want to know the history of the home. Sometimes this isn’t an easy process. If you purchase from a bank, you may not get the historical information you need like previous maintenance work and any repairs that have been done.
8. All Liens Are Your Responsibility
If you don’t purchase from a bank that has taken over the previous owner’s liens, those liens then become your responsibility. Utilities, lawn care, and any unpaid maintenance will be on you.
9. You’ll Probably Get a Lower Appraisal
The determining factor of the loan you get is the amount the foreclosure home is appraised for. It’s not uncommon to get a lower appraisal due to the condition the home is left in. If there is any vandalism or other damage done to the home, it will lower the appraisal amount.
10. Buy New Locks
If you buy a home that’s in foreclosure, you need to buy all new locks right away. A number of people, including the former owners, will have a key to your home, so it’s important that you change the locks right away.
Is Buying a Foreclosed Home the Right Decision for You?
Buying a foreclosed home isn’t for everyone, but if you are looking for investment property you may want to consider it. One of the benefits of buying a foreclosed home is the ability to buy low and sell high. If you are wanting to get into real estate, foreclosures may be for you.
If you are interested in learning more about the real estate game, check out our article featuring seven easy ways to make money in real estate.