Approximately one in every 96 homes saw a foreclosure filing in 2013, a number that had fallen to one in every 122 in 2015. However, just because a home is foreclosed doesn’t mean it isn’t a worthwhile investment. In fact, for many home flippers, buying a foreclosed home represents a major opportunity.
Homes are foreclosed for a variety of reasons, and a foreclosure isn’t a sign of low value. If you’re looking into buying a foreclosed home, here are a few things you should know.
What Happens After the Foreclosure Process?
When a bank forecloses on a home, it means that the tenant experienced some form of financial issue. Because there’s nobody living in that home to make mortgage or rent payments, the bank loses money. As a financial institution, losing money neither looks good nor benefits them in any way. As a potential buyer, that’s where you come in.
Benefits of Buying a Foreclosed Home
The primary reason to buy a foreclosed home is the potential deal you may get on a beautiful house. Any real estate attorney can tell you that the foreclosing lender doesn’t want to hold on to the home because, as previously stated, they’re losing money while it’s in their possession. As a result, they may offer it at a much lower price than it would be listed otherwise.
If you want to buy a foreclosed home, you can use the status of the house to your advantage. Because of the typically lower price point, it’s often much easier to purchase a better home in a neighborhood that is more desirable to you.
Because the price you paid for the home is below market value, the decision to sell, even if the home depreciates, can result in some serious financial gains.
Cons of Buying a Foreclosed Home
In some situations, the disadvantages outweigh the potential gains when buying a foreclosed home, but the potential issues will vary greatly from case to case.
Overdue Home Repairs
Unfortunately, foreclosed homes can fall into disrepair while they’re uninhabited. Real estate lawyers have begun referring to these houses as “zombie homes” because of their distressed status. While you might buy a home for a great price, you should take care to have it properly assessed to find out what kind of work needs to be done.
When buying a foreclosed home, you may become responsible for the debts left by the previous owner. Before purchasing, you should make sure to take the time to fully understand the potential financial burdens you may be taking on with a foreclosed home.
In the end, foreclosed homes aren’t much different than any other homes on the market, with one major difference: the price. While they may have some financial strings attached, the advantages outweigh the negatives in a vast majority of cases.