You may find a home and think, “Wow! The price is amazing. It’s in foreclosure, so we will get the deal of the century!”
It’s true – you can generally find a foreclosed home at a price below market value. The bank is trying to get rid of it, so they are no longer responsible for the upkeep. Just be warned, if it sounds too good to be true, it probably is.
This article will help make you aware of the dangers and pitfalls of purchasing a foreclosed home.
Stepping into the Unknown
Proceed with caution! Walking into a foreclosure auction and automatically putting down the highest bid can be very dangerous.
You may think you’ve scored a great home, only to find that the house has excessive damages. In some cases, buyers have walked away with not one mortgage payment – but two! Not such a great deal now, right?
Bring Your Microscope
Did you know that most foreclosures are sold on a “cash only” basis? Once the investment is made, the money is gone forever. These transactions are also “as-is” sales.
What does this mean exactly? “As-is” means that no matter what is wrong or right with the house, it is yours. The damages, the title issues, the back taxes, and other issues may come attached to the property.
If you aren’t prepared to take on this type of responsibility, think about looking at other places. With a home equity loan, you are only invested in your down payment and any payments you have made up to the point of backing out.
It’s Not Always a Bad Idea
There are some circumstances in which buying a foreclosed property is a great idea. If you have no money in the bank, cannot get a loan, and/or the foreclosure owner is willing to work with you – this could be a perfect solution.
How can you get the ball rolling on a foreclosure sale? Check out your local real estate guides, newspapers, online ads, or contact a real estate agent directly. Find out what homes are foreclosed, and ask for as many details as possible about each.
After you find something, get in touch with the seller. Let them know your situation, and make it clear that you would like to work with them on a rent-to-own contract. Then, move forward with a reasonable offer.
Many times, sellers will take the bait because they want out from underneath the monthly payments. You won’t know until you ask!
What to Walk Away With
No matter the type of property you are buying, real estate purchases can be tricky. Before going directly to the bank for a loan or forking over hard-earned cash, get in touch with an expert to guide you. We have specialists experienced with foreclosures who can provide the insight and advice you need. Give us a call today!
Have you had experience with a foreclosure purchase? Give us the details in the comments below.