6 Things to Know About Buying a Foreclosure

Since the mortgage crisis of 2008, purchasing a foreclosed house has been easier than ever as various agencies and websites specialize in selling them. However, you’ll want to understand that the lower cost of a foreclosed house can be weighed down by various flaws that could even lose you money in the long-run. Make sure that you fully understand what goes into purchasing a foreclosed house.

 

Condition

 

When you’re purchasing a house that’s foreclosed, you’re purchasing a house from someone who ended up not being able to pay their mortgage for a long amount of time. This essentially means that you could be dealing with a house that necessarily wasn’t taken care of very well since the previous owner didn’t have enough money. To be sure that the money you are spending is worth dealing with the condition, look into getting a house inspector in to see if you’re going to have to spend thousands on repairs. Getting a house inspection can either save you money on the sellers lowering the price on the house or you not buying the house at all given it’s not worth it. Always ensure that you pay attention to the condition of the foreclosed house you’re considering purchasing.

 

Time

 

Purchasing a normal house can take not that much time if you’re pre-approved for a loan or plan on purchasing the house completely with cash. However, purchasing a foreclosed house can take a lot more time as you’re dealing directly with a bank. Banks typically take longer to sell a foreclosed house as they necessarily aren’t looking to get a quick paycheck, rather going through their entire foreclosure list in a line. This can hurt you financially as the market value of the house can go down in value between the whole process or you might even miss out on other houses as you’re focused on merely securing one. Make sure that you aren’t hurting that much on time if you’re looking at purchasing a foreclosed house.

 

Competition

 

The mortgage crisis in 2008 hurt many large businesses and families looking to keep their houses. On the other hand, investment firms and entrepreneurs with capital to burn took the crisis to their advantage by purchasing up foreclosed properties on the cheap. Today, many people make their livelihood by purchasing foreclosed properties which means that you’ll have to deal with that competition. While you might not completely lose the opportunity to purchase the foreclosed house you’re looking at, you may end up in a bidding war that eventually makes the final price not worth it when factoring in repair costs. If you do end up losing the house you’re looking at purchasing though, don’t fret too much as foreclosure deals can fall through quickly which can allow you to contact the bank and get the property for yourself. Always ensure that you understand the competition that goes into purchasing a foreclosed house.

 

Hidden Costs

 

When you’re thinking of hidden costs when purchasing a foreclosed house, you’re probably thinking about the repair you’re going to have to do. However, hidden costs also mean various back taxes and liens against the house that you’re going to have to pay for since the previous owner didn’t do so. Hidden costs typically can be found when you’re trying to purchase a house through a public auction and not directly through a bank so make sure you factor that all in when going through the purchasing process. By understanding the true meaning of hidden costs beforehand, you’re looking to save yourself a lot of money in making a budget or choosing a better house for your needs.