Should You Buy a Foreclosed Home?
Buying a foreclosed home can be a great deal. But there’s no such thing as a free lunch – and that discount doesn’t come without a price. Foreclosed homes typically have some common problems, and the purchase of one can be complicated. In this blog, we’ll discuss the pitfalls to watch out for when it comes to buying a foreclosed home.
What Exactly is a Foreclosed Home?
Foreclosure occurs when a borrower can no longer make their repayments. The lender then takes control of the collateral property and sells it to cover the balance of the debt. The home in question is normally sold “as-is”, and the lender isn’t necessarily seeking to make a profit – simply to cover their losses.
That means you can nab a bargain. But the “as-is” condition can leave something to be desired. Sometimes homeowners who can’t afford their mortgage payments anymore also don’t keep up with property maintenance. Furthermore, some people who are forced into foreclosure will lash out on the property – like ripping out appliances or outright vandalism. Once the property has been vacated, it can sit empty for a while – and further issues, like squatting, may arise.
If you’re looking for a fixer-upper, or a place to renovate and flip, this may be perfect for you. But if it’s a new place to hang your hat you’re after, a foreclosed home might not be the best idea.
Purchasing a Foreclosed Home
Problems aside, foreclosed homes can still be very attractive. But you may yet run into problems with financing. Generally speaking, lenders will not normally issue home loans against uninhabitable properties. That’s because they need to take a lien against the property in question to secure the loan. This can be easily resolved by paying cash – but that’s easier said than done. Lenders will differ in their policies so feel free to shop around to find one that will work with you.
There’s also the issue of the previous lender being the seller of the foreclosed home. Unlike a typical sale, this seller hasn’t actually lived in the property – or had much to do with it at all. That means you’ll have to investigate everything about the property yourself. Plus, sometimes foreclosure sales can take some time – and you might have a decent amount of competition, especially if the deal is good!
Where to Find Foreclosed Homes
Finally, if you are interested in buying a foreclosed property, you should know where to look. Fannie Mae’s foreclosure site is a good place to start – along with multiple-listing service sites, online real estate searches, bank offices, and local newspapers.
As for whether you should buy a foreclosed home, that’s entirely your decision. There’s risk and reward involved – and if you’re prepared to take on a property that nobody else wants, you could be in for a serious bargain. If you do decide that you’d like to go ahead and buy a foreclosed home – or you’d just like some more information – don’t hesitate to reach out to UW Funding. We can get in to the specifics of the property in question and guide you to the outcome you’re looking for. Get in touch today!