What to Know About Buying a Foreclosed Home
When you hear of a foreclosed home, you probably picture yourself bragging about how much money you saved on an elaborate home you shouldn’t be able to afford. Or maybe you picture opening the door to a completely gutted home that virtually everything has been ripped out of, including the kitchen sink. You may be surprised that when it comes to a foreclosed home, the reality is probably somewhere in the middle.
Are There Advantages to a Foreclosed Home?
Obviously, there are some advantages or people wouldn’t still be buying them, right? In today’s market, the average foreclosed home is about 5 percent under market value. It may not seem like a lot, but it does make a difference in your payment. Maybe you are thinking foreclosed homes are supposed to be a lot cheaper. Years ago they were. However, when they averaged 20 percent under market value there was also the chance of them being in really bad condition. Quite often, the owner either trashed the home completely or they took everything out of it. So, although they were sold for less, they generally needed a lot more work – sometimes, they needed more work than they were worth.
Disadvantages
If you are going to consider purchasing a foreclosed home, you need to be prepared for the disadvantages.
- Location – Are foreclosed homes available in good locations? Absolutely! They just sell really fast. The minute you see one listed, you have to be ready to buy. The majority are going to be in a less desirable area and school district.
- Rejects are Common – Try not to get upset when your offer is rejected with no explanation. Buying a foreclosed home can be very impersonal. Your bid becomes just another bid on a spreadsheet to analyze. Quite often, you don’t even get a reason for your rejection.
- History is a Mystery – Unlike going to the car lot and buying a vehicle car that you can order a Carfax history report on, you don’t know the history of the home you are looking at. It could have bad wiring throughout or a leaky roof. These are always fun surprises to deal with.
Buying a foreclosed home is not what it used to be, but the prices are still cheaper than what you would find with a comparably priced home on the Internet. . You just need to be prepared for the disadvantages that come with that savings.