If a great deal on a new home is the most important factor in your home purchase, you may be considering purchasing a foreclosure. Many home buyers go this route so that they can buy properties that are significantly discounted in order to use the money saved on remodeling and renovations; however, there are big risks that come with purchasing foreclosed homes that you may want to consider. Pros As previously stated, foreclosed homes usually come with major discounts. Lenders don’t want to pay for the costs of upkeep and taxes to maintain the property for too long because they begin to lose money; this makes them a lot more willing to offer prices below the market rate. Many homes that go into foreclosure come at different price points, meaning you could purchase anything from a starter home to a mansion. These homes may even come with little to no damage or need for additional work. In these situations, buying a foreclosed property could reap major return on your investment because the value of your home is much higher than your purchase price. Cons With any chances of high reward must come chances of high risks, and unfortunately with foreclosures, there are many. Buying a foreclosure isn’t typically an easy process. These homes are sold as-is, meaning lenders won’t be held responsible for any issues with the current conditions of the property, and there are usually a number of issues. Foreclosed homes don’t have tenants to maintain upkeep so they can sit for an extended period of time (months or years) leaving them at risk for plumbing, mold, or wood rotting damages.
Another issue with foreclosed homes is the additional costs you inherit in back taxes, tax liens, and even legal fees for the eviction and removal of previous occupants. You may be held liable for any debts connected to your property and this could result in a hefty financial burden. So what should you do? Deciding to buy a foreclosure could reap major rewards and benefits, but the discounts may not outweigh the stress and added fees that go into making this kind of purchase. For a good property you will be competing with many potential buyers due to increased demand and buyer interest. Consider your finances and make preparations. Many mortgage lenders won’t offer a mortgage for a foreclosed home until certain repair requirements are metSo, the decision is ultimately up to you. After considering the pros and cons and consulting with professionals, do what you think is best and you could possibly end up with the home of your dreams or avoiding a housing nightmare!