PROS AND CONS OF BUYING A FORECLOSURE PROPERTY.
The real key to successfully buying a foreclosed home is in understanding the entire foreclosure process. In today’s competitive real estate market, you need to be open to options like buying foreclosures or real estate owned (REO) properties. It’s no secret that you can get a great deal on foreclosures, but it can also be a tricky and confusing process. Understanding how to find foreclosures, who to use when buying and what kinds of mortgages are acceptable will help you succeed in becoming a homeowner of a foreclosed property.
Pros and Cons of Buying a Foreclosed Home
As with any investment opportunity, buying a foreclosed home has its pros and cons.
Price: Yes, you can get a foreclosed home at a great value. You may get 20% to 30% off of a home in the area you are looking to buy. With the right location and size, this could mean a great starter home or flip home.
Investment opportunity: If you are a real estate investor who knows what you’re doing, snagging a foreclosure in a hot market will make you a great profit. Many people shy away from foreclosures because they don’t have the cash to fix them up or don’t really understand the process.
Distressed property: Foreclosed homes generally need a lot of repairs, and they are sold “as is.” Many times these homes have been unoccupied for years, and the last owners are nowhere to be found to give information about the condition. Not knowing the extent of the repairs when purchasing a bank-owned property, you could end up dumping more cash into it than you planned or even running out of money to finish repairs.
Lenders: it can be hard to close a home loan on a foreclosure property, so they usually end up selling for cash. Most borrowers with a VA (veteran) Loan or Federal Housing Loan (FHA) loan will not make it through their strict guidelines. However, it’s not impossible.