On Buying Foreclosed Property
Buying foreclosed properties is a possibility a lot of first-time home buyers actually consider for a variety of reasons. One of those reasons is price related. Foreclosed properties are definitely much cheaper than let’s say, buying a new one. But what does a foreclosed property really mean? Is buying one a good idea?
A foreclosed property in simpler terms is a property that had a homeowner once but now belongs to a bank. This could be an abandoned property or one that was seized by the bank as it was foreclosed. Foreclosure happens for several reasons. One of which is when the seller didn’t continue making payments for the property due to inability to produce income after losing a job. Another is when the maintenance bills have kept piling up that the seller/owner no longer could afford to pay them. There are also issues with the co-owner that could be a potential reason why some sellers voluntarily go into foreclosure. Simply put, a property goes into foreclosure because payments for it are no longer being made.
If you’re someone who wonders if buying a foreclosed property is actually the idea, the short answer is yes if you do your homework.
Foreclosed properties are good investments because they are sold at very low prices compared to other properties. However, foreclosed properties often make a bad impression in neighborhoods because the house prices in the area also go down, including those that are not foreclosed. A lot of buyers would most likely look for a bargain so foreclosed properties that are selling less than the market value have the upper hand. However, these properties can also become a problem because most of them are in really bad shape. But if you are going to buy one to develop, then you might need to shell out some more funds to improve the property.
There’s another way to purchase a foreclosed property at an even lower price. Foreclosed homes or properties at auction are often priced very low, however, the process you would go through can be risky because the thing about buying at auctions is that, you don’t get to inspect the property before you purchase so improvements may cost more than you had expected. Repairs may be costly because just as mentioned, these bargain properties are in bad conditions most of the time. So, you may need to prepare for that. There are also properties that are bank-owned that are much safer purchases because they went through the foreclosure process and are priced below the market price.
You should remember that buying foreclosed properties is a form of investment. Just make sure you are willing to face circumstances if you ever decide to go through the route.