If you’ve been searching for a new home, you’ve probably come across foreclosed homes in your search. They catch your eye initially because of the price. Today, foreclosures aren’t as easy to find as they were after the housing crises, but they’re still out there.
Unfortunately, there will always be homeowners who fall behind on their mortgage payments to the point of losing their homes. This happens with all types of homes and in all varieties of neighborhoods.
This article is going to look at the advantages and disadvantages of buying a foreclosed home, and the process of what to be aware of if you’re considering it.
Advantages of Buying a Foreclosed Home
The biggest attraction to buying a foreclosure is paying less than what it’s market value would be if the homeowner were selling it. This is especially true in a seller’s market when home prices are rising. Foreclosures are owned by the bank or lender that financed the mortgage. The bank is incentivized to get the asset off their books as quickly as possible. Additionally, foreclosed homes are usually empty, which means they’re ready to be moved into.
Disadvantages of Buying a Foreclosed Home
Unlike buying from a homeowner, when you buy a foreclosure there is little to no negotiation during the sale. The bank has already priced it to sell quickly, so they aren’t open to lower offers. A foreclosed home is sold as-is. You still should, however, conduct a home inspection before making an offer. But the results of the inspection can’t be used to negotiate a lower price for repairs like a traditional home sale.
Foreclosed Home Issues
Probably the biggest downside to buying a foreclosure is the property’s potential condition. Considering the previous owners fell behind on their mortgage payments, chances are they also failed to keep the property maintained. You may be facing unrepaired leaks, appliances, and a number of other problems. If the home has been vacant for an extended period of time, it will develop issues.
Financing a Foreclosure
Another challenge may be getting financing for a foreclosure. Unless the property is in great condition, it could be difficult to secure financing. If you’re trying to qualify for a physician mortgage loan you’ll need to check with the lender to ensure they will finance a foreclosed property.
Adverse conditions will negatively affect the home’s appraisal value. Your lender’s underwriters will require certain repairs to be made before releasing funds. If you’re a physician or resident you should be cautious about buying a foreclosed home. If you find one that just needs a little attention and few repairs it may work. But if the foreclosure needs a lot of work it may cost you more time and money than it’s worth.
