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What do I need to know before buying a foreclosed home?

On Behalf of | May 1, 2020 | Real Estate Law |

Foreclosed homes often hit the market in a great price range, yet many people skip right by them. Why is this and should you do the same? The easy answer is that foreclosed homes are risky investments. Prices are low, but damage to the interior is sometimes high. 

There are three potential reasons for this. People who cannot afford to keep up with a mortgage might also not keep up with maintenance. Secondly, people sometimes trash the homes out of spite. Finally, even when people took good care of the property, weeks or months of sitting empty might have invited trespassers or lead to minor problems spiraling out of control. 

Get financing or funds ready 

Real estate agents, banks and homeowners take buyers more seriously when they have proof they can afford the home. Getting preapproved by a reputable lender or having the cash in hand helps to get the process moving along more quickly and eliminates doubts. 

Ensure you have a great real estate agent 

Before tackling the foreclosure market as a buyer, ensure you work with a real estate agent who knows the ins and outs of the market. Bankrate reports that working with such a professional reduces the likelihood of the process stalling. 

Consider market rate when bidding 

Foreclosed homes have a market rate at which they sell rapidly. Pay attention to the market as while most buyers shy away from these homes, there are investors who look for them specifically. If foreclosed homes sell quickly in the area, consider bidding on the higher end of your budget. 

Prepare for the fixes ahead 

As explained earlier, foreclosed homes sometimes have minor to major repair needs. In most instances, these properties get sold as-is, so there is no opportunity to negotiate to have the floors fixed or the roof repaired. Keep this in mind before making an offer and when deciding on the price. 

If you are a contractor or have access to these skills at an affordable price, foreclosed homes might become a goldmine for you. If you need something move-in ready and you do not have the resources to invest in repairing the home, try to ensure you get a thorough inspection completed to decide on a case-by-case basis if the home is suitable as-is.