If you have not had any luck finding a home that you want to purchase on the market you might want to consider looking into bank-owned properties. In the years since the housing crisis there has been an abundance of foreclosed homes available. Before deciding to go this route you should understand the pros and cons that come along with the foreclosure process.
As a potential homeowner you will have first dibs at the foreclosures as they enter the market. Investors are kept from purchasing a foreclosure for the first 14 days.
A foreclosure typically sells for less than it would if it were being traditionally sold on the market by a homeowner. The size of the difference depends on the both the area and the condition of the home. You will see much lower prices on homes that are considered fixer uppers than a well taken care of high-end home.
Not as many people are interested in purchasing a foreclosure, so you are less likely to run into competition when you find one you want to buy. However, the process can be a long one so many buyers are unwilling to go through it even for a good deal.
By purchasing a foreclosure you are much more likely to end up with instant equity in your home. Foreclosures usually sell for just over what the previous owner still owed on the mortgage instead of what the market value is.
Foreclosures can come with strict requirements. Because homeowners are able to purchase foreclosures within the first 14 days and investors cannot, you will be required to live in the home for a specified amount of time (usually one year) before selling or renting it. Sometimes there are requirements on how quickly you need to occupy the house as well.
If you purchase in an area that has several foreclosures there is a good chance that your appreciation on the property will be slow. The instant equity you should have on your house should help with this somewhat.
Also, if there are multiple foreclosures in the area of the property there is a chance that crime in the area will increase. Areas that have many foreclosures tend to see an increase in break-ins and theft. If you purchase the foreclosure it is a good idea to invest in a security system. There are many quality DIY systems on the market.
Foreclosed homes tend to be damaged and have areas that need repair. Sometimes when homeowners know they are going to be losing their house they stop caring for it as they would otherwise. In some areas of the country theft of copper pipes is typically found in foreclosed homes. Keep in mind that you will be purchasing the house “as is,” so you need to be ready for necessary repairs.
Purchasing a foreclosed property can be a great way for you to find the deal that you are looking for on your next home. If you have carefully weighed the pros and cons of the foreclosure process and are still interested, start looking. Don’t be afraid to jump on the deal when you find the house that meets your needs.