You may have heard that buying a foreclosed home offers you a deal that can help you obtain a home that might otherwise be out of your reach. While this can be true, there is a higher degree of risk associated with buying a foreclosed home. Before you commit to this type of transaction, it’s important to do your due diligence in researching the risks you will face.
You’re Buying the Property in “As-Is” Condition
Banks foreclose upon a home when the previous buyer couldn’t make his or her payments. Their only concern is in selling the home to a buyer as quickly as possible, which means they aren’t obligated to make any repairs on the property. While you should have a home inspection performed, you won’t be able to use it to compel the bank to pay for repairs. In a best-case scenario, you might be able to use the home inspection report to negotiate for a lower sale price.
Closing May Take Longer
Sellers are often as motivated to close on a home sale as quickly as possible, which also works for the buyer. However, banks aren’t as eager to get through the transaction, especially when they have a backup of foreclosure sales to process. While some foreclosure sales may take as little as 45 days, they can take longer. This may mean that, as the buyer, you may have to extend your current living arrangements indefinitely.
Make Sure You Are Getting a Deal
People assume foreclosures are automatically marked down since the bank is only interested in recovering the amount owed to them. This isn’t always the case, and banks may mark up the sale price to an amount that’s above the home’s market value. Be sure to obtain a reliable assessment of the home before making an offer. This will help ensure you’re not paying more than the home is worth. If you feel the bank is asking too much, wait awhile. They will usually lower the asking price once the home has been on the market for a few weeks.
Buying a home is an investment and, just like any investment, doing thorough research will help you minimize your risks. Knowing more about the challenges you’ll face will help you decide if this is the right investment for you. It will also help you prepare yourself to handle any challenges that arise throughout the process. This will help you make a more successful experience out of buying your first foreclosed home.