Buying a home is a big investment, making the home search process that much more important. Whether you are looking for a deal, interested in flipping, or merely found a foreclosed home that has sparked your interest, there are a few things to consider before committing to the purchase.
What is a foreclosure? A foreclosure occurs when the homeowner has stopped making payments on their mortgage loan, causing the lender to take the house back and sell it.
Banks don’t typically negotiate. Foreclosed homes are owned by banks, rather than an individual. While you may think you’ll get a great deal by going after a foreclosure, that is not always the case. Trying to negotiate with a bank versus a person can often times be more difficult. While the bank may have a listing agent, communication can be a challenge and usually occurs merely via email.
A home inspection is a must. Most foreclosures are sold as is so a home inspection is critical. Although banks do not usually agree to cover the costs needed for the home repairs, it is better to know the condition of the home before purchasing it. (This can be said about any home you’re thinking of buying.) A home inspection will provide insight into issues you may not be able to see from the surface, such as the foundation, roof, plumbing and electrical system.
Budget properly for needed repairs. Typically, foreclosures are distressed properties, and they often need some amount of work. After all, if the previous homeowner wasn’t making the mortgage payments, it’s likely they didn’t spend the money to do regular maintenance and make repairs.
It is important to be fully financially prepared, so you are not stuck with a home you can’t afford to repair. It is common for foreclosed homes to be stripped of appliances, copper pipes, light fixtures and more.
Flipping a foreclosure can be risky. It is important to have a clear understanding of the work required to get the home in good condition if you plan to resell for a higher price. You should also be knowledgeable about the local real estate market for that property and surrounding neighborhood. Flipping a home requires a large profit margin.
Ask important questions. It is essential to find out specifics about the home before you commit to purchasing it. Consider asking the following questions.
- How long has the property been vacant? If vacant for an extended period, various issues from plumbing fixture leaks to mold, can arise.
- Is the title clear with no liens or unpaid utilities? It is important to know the property debt history.
- Are there any unpermitted improvements on the property? You can rely on county records to help determine if there have been additions to the property without the proper permits.
While there are a lot fewer foreclosures than in previous years, they are still present throughout neighborhoods across the United States. If you are considering buying a foreclosed home, I can help answer any questions you may have and walk you through the homebuying process. Please give me a call at 301-320-8349.