FORECLOSED HOMES – ARE THEY REALLY A GOOD DEAL?
Foreclosed homes are homes in which the owner was unable to pay for and the Lender has taken back.
The legal steps to foreclose on a home vary from state to state thus the time for the actual eviction, foreclosure and going to auction (if necessary) varies also. When a finance company or a real estate agency purchases a property at auction and it is being re-sold, this is referred to as real estate owned (REO).
If you are looking to buy a foreclosed property to flip, be sure to check the home sales for that area. If homes are not selling, odds are you will not be able to sell very quickly after the makeover either.
Advantage of Purchasing a Foreclosed Home
The only advantage of purchasing a foreclosed home that I can think of is that the price is usually discounted.
Risks of Purchasing a Foreclosed Home
Risks of purchasing a foreclosed home include the condition of the home. If the previous owner was evicted, he/she may have taken their frustrations out on the house. Another risk is that many people are trying to buy foreclosed homes which lowers the probability of finding a good deal. You will definitely have to move very quickly on the better deals. The home may have liens on it (ex. unpaid taxes) which poses another risk. Inquire about any potential liens and find out who is responsible for paying them.
Things to Consider When Buying a Foreclosed Home
When buying a foreclosed home, be sure to have all of your financing in order .. especially if the property is already at auction and you plan to bid. Many auctions require payment in full within 24 hours. For REO homes, you can get regular financing.
Foreclosed homes are sold ‘as is’ which means that if you find any problems, repairs will not be made. For properties that are already at auction, you will not have an opportunity for a proper inspection beforehand to determine if there are any major problems and you could end up with a bad deal. For REO homes, you can schedule a proper inspection.
There is usually more paperwork when buying a foreclosed home because a government agency is involved.
In summary, buying a foreclosed home can be risky. If you decide you want to buy a foreclosed home in Central Texas and do not want to pay too much, be sure to contact your real estate agent to make sure the asking price is comparable to other homes in the area.