Let us define first what is foreclosure. As per Real Estate Glossary, Foreclosure is a legal process during which the owner forfeits all the property rights. The forfeiture happens only when a homeowner does not pay the mortgage usually for more than 90 days. After such a period, the bank has the authority of repossessing the home and sell it again to other prospective buyers to recover the unpaid loan of the previous owner.
Most of the buyers try to check those foreclosed properties primarily because its price is lower than the current market price. Banks will sell it for an attractive price since their main objective is to cope with the amount lent to the previous owner. The price might sound catching, but before entering into this kind of transaction, those interested to buy foreclosed properties should consider many other items as follows:
- Property Information – banks usually will not disclose keen details of the home since they were not the ones who lived there. You need to be very careful, and you should know how to check foreclosed properties as to the quality of the home. You need to do a thorough inspection.
- Contract Checking – you have to check the contract word for word. The main objective of the bank is to sell the property as soon as possible. They will be the ones to assign the dates and terms that you can’t huggle anymore. If the bank sees that you are not comfortable with their conditions, then they will move to another buyer. You should know the legal terms used in the contract.
- Property Repairs – Most of the time, those foreclosure homes are of no tenants for almost a year. Which means there are many repairs to be done. The previous owner might already know that the property will be repossessed anyway, so they may not take good care of the property.
You might also need to hire the expert general contractor for the total renovation of the unit. You may need several months for the property to be in a good livable condition, which you have to consider also.
You have to consider also all the expenses associated with the repairs. You might spend a significant amount on top of the amount of the unit given by the bank.
- Property Auctions – banks and real estate brokerages usually do the Property Auctions. There are lots of foreclosed properties you can find here usually not found on the bank’s website. From the auction, you can discuss directly with the agents your concerns, and you can find many other options.
- Other Fees – just like buying other kinds of properties, additional fees are always associated with it. Confirm all the charges that you have to pay, especially those in the contract like registration fees, notarial fees, transfer fees, etc. Those fees will surely give you a headache if you are not aware and you’re not ready for the payments you have to do.
With those factors mentioned, you can still opt to buy a foreclosed property if you possess a high tolerance to stress if you are with above-average knowledge on contraction and home renovation. It is best to tabulate every detail, and from the details, you decide whether you will pursue buying a foreclosed property or you will buy a new one.
I hope this article at least gives you an idea.