A foreclosure is a property which has been used as collateral for a loan with a financial institution and is sold as a result of the lender’s inability to repay the loan.
Buying a foreclosure can be a good deal because the property is usually sold at a considerably lower rate than is obtainable. The reason is, the seller has little intention of making profit and only wants to recover his money.
As tempting as this sounds, there are pitfalls associated with buying a foreclosure. Below are a few tips that would be helpful when you’re considering buying one.
- Budget Carefully: Because a foreclosure comes cheap, you might be tempted to jump in and make a quick purchase, but you should be aware that there might be additional costs that come after purchase, hence ensure that you can fully afford it.
- Ask the right questions: You need to make careful and necessary enquiries before purchase. Some good questions to ask might be; “how long has the house been empty?” Bear in mind that the longer it has stayed vacant, the more damages there are likely to be.Also, if there was a controversy or scandal surrounding the closure of the house, you might not be able to get any tenants if you intend putting the house on lease.
Advantages of buying a foreclosure:
- You’re guaranteed of the property title: Usually, the bank or financial institution must have done a thorough background check before accepting the property as collateral. So, you are guaranteed that the title of the property is clean and free from dispute.
- Property comes at a discounted rate: Because the institution is eager to recover their money, they typically put the property at a giveaway price so it gets sold easily
- You can move in immediately: Because the house has been foreclosed, the occupants should have moved out. So, if you are in a hurry to move into your new home, this will work for you.
Disadvantages:
- You cover expense of repairs: Often times, the seller does not allow you inspect the property before buying. Even when they do, they do not cover cost of repairs. This means, that you have to cover cost of repairs in the house most of which you only discover after moving into the house.
- Also, foreclosure listings affect the price of houses in that environment negatively.
Ultimately, as with all home and property purchases; ensure you have a professional agent to guide you through the purchase to ensure you get a fair deal.