Buying a foreclosed house is one of the greatest deals you’ll ever accomplish. However, as with many other things in life, it does come with its fair share of upsides and downsides. Understanding the process and its intricacies are, therefore, the best things to ensure you get the most value when buying a foreclosure.
To help point you in the right direction, we will highlight some of the critical aspects that you need to keep in mind before getting a foreclosure:
National foreclosure rates have been falling
Unlike a decade ago, when there were higher rates of national foreclosures, the number has dropped significantly as the economy gets back up from the great recession. According to ATTOM Data Solution’s industry report, the rates fell to a 13 year low of 0.47% in 2018. What this means for you is that foreclosed homes aren’t as readily available as they used to be in 2008. That is because fewer homeowners are failing to pay the mortgage.
Foreclosures are divided into two categories
You can purchase foreclosed homes in two different ways: the first way is through a public auction, where lenders (usually the bank), auction the house after the homeowner fails to pay for their mortgage. The second way is to purchase the property once the bank assumes its ownership. When a bank takes ownership, the property is now listed and sold by realtors. In which case, you will buy it as you would any other home.
Buying at an auction vs. buying through a real estate agent
As mentioned earlier, you can buy a foreclosure through an auction or a real estate agent. While both ways have their sets of pros and cons, the latter is easier and simpler if you are just getting started. In an auction, you will have to outbid folks who are experienced, and then pay the amount in cash. Again, you won’t get an opportunity to see the interiors of the house, and thus have no clue of the repairs or renovations you’ll need to do. With a bank-owned foreclosure, you’ll have enough time to make an offer and a counteroffer, get a mortgage, hire your agent, view the house and so on.
You’ll need to work with an expert
Buying a foreclosure can be easy and hard depending on whom you work with. If you choose to do it alone, it means you will have to learn about the intricacies of the process and also do everything all by yourself. It is more like experimenting in real-time. Yes, you will save some amount, but might end up spending more. Hiring an expert, on the other hand, lifts the entire burden from your shoulder and allows you to focus on what’s critical. A real estate agent will, for instance, identify the right home for you, connect you with the right professionals, and hold your hands throughout the process. They will save you from falling into the potential pitfalls along the way.
An inspection will save you from headaches and frustrations
One thing that’s synonymous with many foreclosed homes is the maintenance and condition problems. This is usually the case because of the circumstances under which the previous owner vacated the home and the time that has passed with the house unoccupied. So, inevitably, you will have to deal with bad renovations, lack of cleanliness, water damage, no electricity, lack of necessary maintenance, overgrown or dead grounds, and/or personal property left behind. In some cases, there may be vandalism and neglect.
You need to move fairly quickly
Since you won’t be the only person looking to save up on costs of owning a property, it’s essential to do things pretty fast. Investors are always on the lookout for such properties, so you have to be quick. However, this doesn’t mean that you shouldn’t take the time to calculate your moves. With an expert by your side, this shouldn’t be hard to do.
Don’t have a fixed amountAs mentioned earlier, foreclosures will almost always need some fixing here and there – the banks won’t do it for you. So, it’s in your best interest to have some money set aside for repairs and renovations.