The Risks and Benefits of Purchasing Foreclosed Property
The Risks and Benefits of Purchasing Foreclosed Property
Buying a home is a big decision. A foreclosure is a legal maneuver that lenders use to recover the balance of a loan that someone has defaulted on. Many banks are eager to resell the foreclosed property in order to recover some of their losses. The current housing market is complicated, but a good way to save money is to purchase a foreclosed house. That being said, there are risks and benefits that should be considered first.
The risks of dealing with a foreclosed property are the following:
Maintenance issues- Some of the structures are in disrepair. The
previous owners may have abandoned them a long time ago. Sometimes they destroy
the homes because they are angry and frustrated about their eviction. Potential
owners are not always allowed to conduct thorough inspections. It is risky to
buy anything that has not been inspected.
Processing delays- Beware of real-estate owned houses because of the lengthy amount of time it takes to have the paperwork processed. Banks have a tendency to move slowly in these cases. Another inconvenience is that there is a lot more paperwork than that which is required at an auction.
Legal problems- One legal problem could involve an eviction. If the previous owner refuses to vacate the premises, then you will have to pay the legal fees to have the person evicted. Other common legal costs are taxes and contracting fees that transfer to the new owner. You may also be at risk of paying lien or second mortgage payments.
The benefits of obtaining a foreclosed property are:
Research time- A potential owner has more time to do research during the pre-foreclosure period. He/she can investigate the title, comparison shop and inspect the property. It is important to get as much information as possible before you sign a contract.
Price- The price of a foreclosed piece of real estate is reduced. It is referred to as below value. In today's climate the foreclosures are setting the market value. Sometimes the savings are as high as 30%!
Monetization- You can profit from real-estate related business. Monetize your ownership by renting out or flipping the property. Even more money can be made if you do both. Tenants are attracted to stability and good maintenance.
Auction advantage- A transaction at a foreclosure auction is uncomplicated. After placing the highest bid, you only need a check or cash to make a down payment.
You are then required to fill out a few forms and the property is yours. If you can pay the entire bid amount at one time, and then you can move in almost immediately.
There are several risks and benefits to buying foreclosed properties. You can save money, and there is less competition, but sometimes a property is not in good condition and you may have to pay exorbitant legal fees. Do research before you make a final decision. Locate the best offers in the area where you want to live. Investigate foreclosure laws, hire a competent real-estate agent, attend an auction and inspect the property yourself. Currently it is a buyer's market. Good luck.
Buying a home is a big decision. A foreclosure is a legal maneuver that lenders use to recover the balance of a loan that someone has defaulted on. Many banks are eager to resell the foreclosed property in order to recover some of their losses. The current housing market is complicated, but a good way to save money is to purchase a foreclosed house. That being said, there are risks and benefits that should be considered first.
The risks of dealing with a foreclosed property are the following:
Processing delays- Beware of real-estate owned houses because of the lengthy amount of time it takes to have the paperwork processed. Banks have a tendency to move slowly in these cases. Another inconvenience is that there is a lot more paperwork than that which is required at an auction.
Legal problems- One legal problem could involve an eviction. If the previous owner refuses to vacate the premises, then you will have to pay the legal fees to have the person evicted. Other common legal costs are taxes and contracting fees that transfer to the new owner. You may also be at risk of paying lien or second mortgage payments.
The benefits of obtaining a foreclosed property are:
Research time- A potential owner has more time to do research during the pre-foreclosure period. He/she can investigate the title, comparison shop and inspect the property. It is important to get as much information as possible before you sign a contract.
Price- The price of a foreclosed piece of real estate is reduced. It is referred to as below value. In today's climate the foreclosures are setting the market value. Sometimes the savings are as high as 30%!
Monetization- You can profit from real-estate related business. Monetize your ownership by renting out or flipping the property. Even more money can be made if you do both. Tenants are attracted to stability and good maintenance.
Auction advantage- A transaction at a foreclosure auction is uncomplicated. After placing the highest bid, you only need a check or cash to make a down payment.
You are then required to fill out a few forms and the property is yours. If you can pay the entire bid amount at one time, and then you can move in almost immediately.
There are several risks and benefits to buying foreclosed properties. You can save money, and there is less competition, but sometimes a property is not in good condition and you may have to pay exorbitant legal fees. Do research before you make a final decision. Locate the best offers in the area where you want to live. Investigate foreclosure laws, hire a competent real-estate agent, attend an auction and inspect the property yourself. Currently it is a buyer's market. Good luck.
Shannon Sunnybrook enjoys writing about finance, investment, and dental insurance quotes.
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Author Bio: Rob Alley earned a bachelors degree at Virginia Tech, in Blacksburg, VA in Biology. Rob Alley consults with homeowners regarding Real Estate transactions and speciliazes in listing and selling Charlottesville Real Estate. Realtor/Owner of Virginia Real Estate Solutions at RE/MAX Assured Properties
Charlottesville Real Estate Experts
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Great post Robert! Buying foreclosed properties will save you more money but you will need to have a very long patience to get it together with the work you need to put on this home to make it livable as most of them were already abandoned.
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ReplyDeleteMany Americans are still underwater on their mortgage, owing more on their home than it is currently worth.
ReplyDeleteA high number of foreclosures continue to beat down on several housing markets.
ReplyDeleteI agree with all of you. Patience is key and the foreclosure problem needed a solutions yesterday!
ReplyDelete