Why You Should NOT Buy a Foreclosure
1. You May Not Be Getting a Deal
Just because it's a foreclosure does not mean it's a good deal. Some people pay too much for a property if it's a foreclosure because they think it's automatically a home run.
You should go to your real estate agent and run the comps in the neighborhood. The most important thing is what's selling right now and for what price. This will give you a good idea of what to really offer.
Foreclosed homes are considered distressed properties for a reason. They are not in move-in conditon so they require a discount. How much of a discount depends upon the location, the condition of the property (how much work is needed) and how many other similar properties are for sale at the time.
If you need help figuring it out, I can help!
2. As-Is Means As-Is.
Foreclosed homes are purchased in an as-is condition, meaning no repairs will be made by the seller which is now the bank.
The foreclosure process starts when a property owner falls behind on mortgage payments. Many owners of homes that go into foreclosure have been struggling financially for almost a year before they give up, which usually means that the house has not received needed repairs or general maintenance for a while.
This may include everything from missing light bulbs to roof leaks. Tree limbs in front yards, broken appliances and windows, and dirty carpets, floors and walls are found in even very-affluent area foreclosures.
This can be a boon -- or boondoggle -- for a buyer.
Houses in poor condition might fetch bargain prices, but repairs can boost the cost again. The first rule of real estate, "location, location, location," applies in these situations. If there is trash in every room of the house, but the foreclosure is in a good area with high property resale values, hold your nose, walk through the entire house and consider making an offer.
Be sure to get an inspection. Arrange for the utilities to be turned on so your inspector can check all the mechanical systems. The bank may not be willing to fix what's wrong but at least you will know most of what needs to be fixed before you buy.
Before you make an offer, have a SOLID plan on who will handle the repairs and fix-up. Are you handy? If not, do you have friends and family who are? If you do, a foreclosure can be a great deal. Just be realistic about your skill levels and how long it will take to make the home liveable.
3. The Home may not be Loanable in its Present Conditon
Depending upon the repairs needed, some homes may not pass a FHA inspection. Even though, it might be a really nice house in a nice subdivision if it fails the inspection, the lender can't lend the money until the repairs are done. BE PREPARED! Advise your lender that you are looking at foreclosures. Your lender can recommend a loan program better suited for your needs.
