What you need to know about buying a foreclosure
Many American employees live paycheck to paycheck, spending more money than they earn each year. This could be the reason that every three months, over 250,000 people are being forced into foreclosure and moving out of their homes. Going through a home foreclosure does damage to a person’s financial and emotional stability. For those looking into buying a foreclosure, there are many things you need to know.
The Positives of Buying a Foreclosure
The largest positive of buying a foreclosure is that you are getting a house at a lower price than it would be listed for if it wasn’t in foreclosure. The seller is looking to achieve a fast sale to avoid extra costs on the home, so this creates an opportunity for below market purchase price. This also gives the buyer an increased option to bargain for the home. When a house is in foreclosure, the seller or lender is still paying for the home and the fees associated with the mortgage loan so they want to sell them home as quickly as possible.
Another positive is that the seller will most likely have to do repairs on the home, instead of the buyer needing to worry about repairs. This keeps the price of the home lower as you won’t need to make unnecessary repairs. The cheaper price also gives buyers the chance to move into higher-priced neighborhoods. Higher-priced neighborhoods might have been unaffordable for the buyer before, but a foreclosure home selling for less than market value will make the neighborhood more affordable.
A foreclosure home provides first-time home buyers an easier way to purchase a home. Down payments tend to be lower because of the lower price tag on the foreclosed home. Mortgage lenders require a down payment of 10 to 20 percent of a home’s purchase price. A buyer can use regular mortgage financing with a foreclosed home, providing relief to the buyer while getting the home at a lower cost than market price.
As a buyer, if time is a pressing issue, a foreclosure can be the quickest way to purchase real estate property. After buying a foreclosed home the previous homeowners will be out of the home, giving you the ability to move in soon after you make the purchase.
If you choose to sell the home later on, you will make a profit over what you actually had to pay for the house as a foreclosure. When you sell it you will be able to sell it at market value of the home as opposed to a lower price like what you are paying for as a foreclosed home.
The Negatives of Buying a Foreclosure
Buying a foreclosed home means that your time is limited and might make you feel rushed into a home you aren’t positively sure about. The seller and the lender will feel the pressure of trying to sell the home, which could make for a lot of competition. This might boost the price of the home with many people trying to purchase the same home as well.
Many foreclosed homes are bought “as is” which means that if something is wrong with the home, it’s the buyer’s responsibility to fix it. Even though the previous owner might have fixed up the house, there could be some underlying issues that they might not have been aware of or decided to ignore. This could end up costing the buyer tens of thousands of dollars for the house to be up to code.
If you decide to purchase a foreclosed home at an auction, you have to be aware that you need 10 percent for a down payment when you bid on the home and be ready to show proof of financing before you can sign for the home. This option offers a quick and easy way to buy a foreclosed home but you are unable to look at the house before you buy it. You could end up buying a home that is not worth what you paid, in a bad neighborhood, or not the home you thought you were buying.
When buying a foreclosed home, it’s important to know the basic about what you’re getting into. Foreclosures aren’t always the best option for everybody, but if time and money are a restraint, it might be the best option for you as a homebuyer. There are many homes being foreclosed as the market improves, giving homebuyers more options. Even though time is still limited with foreclosures and the amount of people looking to purchase real estate, you might find the perfect home for you at a price lower than its market value.