If you’re considering purchasing a foreclosure home you first need to be aware of the pros and cons of doing so.
In many situations, foreclosed homes often sell for less-than-market rates, which can make them highly attractive to a buyer looking for a good deal. Should you buy a foreclosure, you might be able to afford upgrades or you might even be buying a larger home than you first thought you could afford.
Buying a foreclosure can also be alluring financially should you want to sell it later. Since you’ve paid less than the market rate for it, if you make updates and the property appreciates, you could sell it for considerably more.
However, there are also challenges that can come with buying a foreclosed home that you should consider. Among the facts to consider:
- A foreclosure could have legal issues. Before buying it, make sure you do your research to ascertain whether there are liens on the property for unpaid taxes, homeowner association dues or if the home could have been used as collateral on other outstanding loans. The last thing you want is to be held responsible for debt you knew nothing about prior to the purchase.
- You could face more red tape with a foreclosure. There will likely be extra paperwork and slower response times and don’t be surprised if you have to wait several weeks for a reply after making an offer because you’ll be waiting on the current owner, the lender and any lienholders to approve the bid.
- Once you own a foreclosed home, you also own any issues that come with that property. Should there be issues with the foundation, a leaking roof, etc., you will be responsible for those repairs. In contrast, those problems likely won’t be an issue should you purchase a new home.
- Many foreclosures might not be in the best shape as the former owner, knowing the home was going to be foreclosed on, could remove appliances or any other valuable assets, such a flooring, copper pipes, faucets, etc.
- A foreclosed home, particularly if it is older, could have bad wiring, buckled floors, etc., challenges you wouldn’t face with a new home.
- If the foreclosed home has been vacant for some time, it may not have been properly cared for. The roof could have leaked and caused damage, termites might have moved in, etc. You could end up spending thousands of dollars trying to make the home livable.
- With foreclosed homes what you see is what you get, unlike with a new home that might have everything you want in a dream house. You might need to replace outdated appliances, wallpaper, flooring, etc., all of which can end up putting a dent in your wallet.
Buying a home is one of the biggest investments you’ll make during your lifetime. In order to have the home of your dreams – and know its complete history – you may prefer to stay away from foreclosures and just pay a little more money to have peace of mind.