Buying a Foreclosure: The Good and Bad
After the crash of the housing industry the market was flooded with foreclosed homes. While the real estate market has increased since several years ago, you don’t have to look for or hard to find a foreclosure on the market. Many foreclosures are in better shape than those of the past and as a result, could be a great opportunity to get a steal on your next home or investment.
Advantages of Purchasing a Foreclosure
You Can Find a Deal
The average foreclosure is sold for 5 percent below the comps in the area. This is not as significant as the savings in the past, which ranged from 15 to 20 percent, but the homes tend to be in better condition as well. If you are looking for a great deal on a house, a foreclosure may be your best option.
Disadvantages
A Foreclosure Carries Risks
There are more risks involved when purchasing a foreclosure. You are purchasing the house “as is,” meaning any of the problems that are discovered in the house are solely your responsibility to fix. You will not have as much information to base your decision off of, which can end up costing you in the long run. This risk was easier to overlook in the past when the typical house savings was at a higher percent.
Locations Can be Bad
This is not always the case, but many times areas with a high amount of foreclosures are not in the desirable locations that people want to buy in. The area may be more run down and the schools might not be the ones that families want to send their children to. If you are looking to purchase for investment opportunities really look at the surrounding areas and what the community and neighborhood has to offer before placing an offer. The foreclosures that do happen to be in desirable locations usually move off the market fast.
The Bank Doesn’t Care About You
When purchasing a foreclosure you are working with a financial institution that is facing a loss on a loan. They do not care about your story or why you are interested in buying the house. When you purchase a house from an individual sometimes your “story” can affect the seller and they may be willing to accept a lower price.
Banks are basing their decision off of their balance sheet. They want to unload the property, but they want to recoup every dollar that they can to minimize their loss.
While it may seem like the market is flooded with foreclosed homes, many of them are sitting because the deals of the past are no longer available. If you are interested in purchasing a foreclosed property make sure that you do enough research to determine if the risk is worth the reward. If you get a great deal in a bad neighborhood, you will eventually regret your decision. However, if you can find that needle in the haystack and end up with a beautifully cared for home in a desirable location you will be counting your blessings.