Pros and Cons of Buying a Foreclosed Home
Before you make the decision to purchase a foreclosed home, you should be aware of the risks and benefits. A foreclosure is a legal process that takes place when the debtor is unable to pay their loan back to their creditor. Here are some of the pros and cons of buying a foreclosed home.
Pros:
Cheaper price:
Firstly, when a bank repossesses a property, they need to sell it as soon as possible. The reason being, they need to recover outstanding fees such as property taxes, loan balances and conveyancing fees. Furthermore, because the banks needs to clear these costs, they will typically sell the home at a relatively cheaper price, compared to the property’s actual value. However, you will not be getting a home that is in great condition. Moreover, you should consider costs of repairs and renovation before you decide to purchase it.
Concessions and Bargaining Power:
Secondly, when it comes to a property that has been foreclosed by the bank, you typically have some bargaining power. Furthermore, you will be able to get concessions easily. Moreover, banks avoid ownership of properties to escape from costs such as taxes, insurance etc.
Good Potential Investment:
Lastly, because you will be purchasing this property at a lower price, your return on investment will be great if the right steps are taken. After repairs and renovations are done, the property’s value increases. In the event that you want to sell, you will be able to get a good amount due to the reconstruction. However, make sure you receive detailed inspections and contractors costs. This will ensure that your investment actually makes money.
Cons:
Bad Home Condition:
Homes that have been foreclosed are not always in the best state. The reason could be, the previous owners did not have enough resources to maintain the property, leading to its foreclosure.
Time Frame:
Secondly, although banks are eager to quickly sell foreclosed homes, they delay the closing process. Although, they receive many offers, they do not provide documentation on time and offer slow responses.
