A raise in foreclosed home activity might appear like bad news, but it’s actually a good indication for these markets because it means the logjam that’s been keeping housing in the slump is finally starting to break up. It’s also good news for bargain hunters and smart home buyers who want to get a cheap house. If you’re looking for foreclosed properties for sale there are some things you need to know before taking the leap.
Foreclosed homes for sale
First of all, if you’re fresh to the foreclosure market, don’t even consider about buying foreclosed housing at a foreclosure auction. The procedure has risks that can catch even seasoned bidders. Prospective buyers can’t examine the foreclosed town homes to identify if there’s any damage — highly likely if the foreclosed townhouse has been empty for a while — or find out if there are any senior liens (such as outstanding taxes due on the property). A purchase can turn into a Pandora’s Box of expensive repairs or payments to creditors.
Beware the Current Owner of the foreclosed property
If the home owner who defaulted is still residing in the home when the auction takes place, the buyer has two possible headaches to worry about: evicting the former owner, and the possibility of vandalism. It’s not unheard-of for resentful owners to trash the house before being evicted. Additionally, buyers have to pay in cash, which isn’t an option for most people.
Buy the foreclosed real estate from a Bank
A better choice is to look for foreclosed condos for sale that are possessed by the bank or “REO” — real-estate owned — in industry lingo. The bank is forced to pay off senior liens like back taxes, you won’t have to kick out anyone residing there and you’ll be able to check the homes for damage and determine how much you’ll need to set aside for any repairs.
Be the first to view the foreclosed property for sale
Many buyers go through real estate agents who focus on foreclosures, but if there’s a particular property you have an eye on, you can address the lender directly after the foreclosure but before it’s indexed for sale. Specifically if the institution possessing the title is a localized or community bank that doesn’t have a big infrastructure for handling foreclosure sales, they might be happy to get it off their hands.
Prepare to Spend Extra on Maintenance of foreclosed townhouses
Factor the cost of any essential repairs into your budget, since foreclosures are commonly sold “as-is.” Be mindful with these REO or bank-owned properties that a lot of them are in quite poor condition. The bank that possesses the title isn’t going to make necessary repairs for you before the sale, and it’s unlikely to reduce the price of the foreclosed properties for sale to compensate you for repair expenses you’ll have. Of course, you can attempt to negotiate the price down, especially if the foreclosed real estate has been on the market for a lengthy time and hasn’t budged.