Blog

Should I Purchase A Foreclosed Home?

April 28, 2021

5 Things To Consider When Buying Foreclosed Homes

Whether you’re looking to sell your home on your own, hire a real estate agent, or looking to purchase a foreclosed home, there are several things one should consider. The housing market is in an adjustment phase with many people going through foreclosure. This has ignited new opportunities for property investors and potential homeowners. With so many homes coming up for sale, there are plenty of opportunities for you to find a deal on a foreclosed home, but buying a foreclosed home comes with its fair share of risks, and knowing what to watch out for is the best way to avoid becoming another statistic. To assist you in your endeavor to secure a great property at a good price, we have compiled a list of the top five things to consider when buying a foreclosed home. With these in mind, there’s no reason why you can’t find your perfect home!

Understanding Foreclosure - What Is It & Its Types?

Foreclosure is the process of repossessing a property that is in default on its mortgage payments. This happens when the homeowner fails to make a payment or make a payment on time. In fact, about 1 in every 12,448 homes are foreclosed every year and though that number may seem too insignificant to you, the effects are more detrimental than you might realize. Regardless of what and how they come about, foreclosures provide a great opportunity for investors and new homeowners alike. Available in a wide range of properties, from bungalows to condos to executive homes, foreclosed homes can be found almost anywhere. So, let’s take a look at the types of foreclosure to ensure you are completely clear on what you are buying.

1. Pre-foreclosure:

A property that is in pre-foreclosure is not actually in foreclosure but has started the process of getting into foreclosure. This happens when the homeowner is delinquent on the mortgage payments and is at risk of losing the property. In fact, in most states, homeowners are given a 90-day notice before foreclosure is made. Also, all mortgages require that you pay taxes and insurance as well as make mortgage payments, so before you go out and buy a foreclosed home, it is important to check the status of the taxes for current and previous years.

2. Auction:

Auctions are held on the properties that have been in foreclosure for a while and are being sold to the highest bidder. The best thing about foreclosed homes that have been auctioned is that you can get into a great home at a great price, with a lot of benefits. In fact, many companies buy foreclosed homes and rent them out to earn income, which can be a great deal for you.

3. REO (Real Estate Owned):

When a lender forecloses on a property, it takes ownership of the property and manages it until it is either sold or rented out. This is known as an REO, or Real Estate Owned. REOs are the best way to ensure that you get a great deal on a great home, as most lenders are looking to sell the homes as soon as possible. And with so many options available to you, you’ll be able to find a property that fits your tastes perfectly.

4. Government Owned:

Government-owned properties are those that have been abandoned by the homeowner or have been in foreclosure for a long time. Though these properties are not necessarily foreclosed homes, they are in a state of foreclosure, and in most cases, they can be bought at a much lower price than the market value. However, you should keep in mind that there may be restrictions on the purchase of such properties as well as many other issues to be addressed. But even if there are issues and restrictions, buying a foreclosed home can still be a great investment, so it’s worth taking into consideration.

5 Important Steps to Buying Foreclosed Homes:

Buying foreclosed homes could be a very lucrative business. If you know how to go about it properly, it can be an excellent opportunity to invest your time and money in something that can be both profitable and fun. Listed below are the five most important steps to buying foreclosed homes.

1. Determine Budget:

Your budget is the single most important factor in buying a foreclosed home. It should be determined and understood thoroughly before you do anything else. Not doing so can lead to serious financial problems. It is also important to note that foreclosed homes are different from regular homes, as they can be severely distressed and even dysfunctional. If you are looking to invest in a foreclosed home for commercial purposes, be prepared to spend more than you initially planned.

2. Hire an Experienced Agent:

Once you have determined your budget, you should start looking for a real estate agent that has experience in buying foreclosed homes. A real estate agent that specializes in buying foreclosed homes can not only help you understand the market and find the perfect property for you, but they can also save you a lot of time and effort by handling all the paperwork and procedures, ensuring a smooth transition from foreclosure to purchase.

3. Mortgage Pre-Approval:

You need to start looking for a mortgage pre-approval. This is very important, as it is an essential part of buying a foreclosed home. A pre-approval ensures that you get a loan from the lender that is in favor of buying the property. It also helps you secure a good interest rate, making your mortgage a lot easier to afford.

4. Make Competitive Purchase Offer:

Once you have all your ducks in a row, it is time to make your competitive purchase offer. There are multiple ways of making an offer, but it is essential that you come up with a very competitive offer, as the seller will be able to use this to determine how much they should ask for the property. It is important that you understand the property you want and how much you are willing to pay for it. It is also important that you don’t underestimate the amount you are willing to pay.

5. Get a Home Inspection:

Once you have made your competitive purchase offer, you will need to get a home inspection completed. It is essential that you take this step, as you will find out if there are any issues that you will need to address.

Conclusion:

Buying foreclosed homes is a very lucrative business. This is an excellent opportunity to invest your time and money in something that can be both profitable and fun. But it is important that you be prepared to invest more than you initially planned. Being armed with the right information will help you make an informed decision, ensuring that you get a great deal on a great home at a great price.

Should I Purchase A Foreclosed Home?