When a home owner is no longer able to make their monthly mortgage payments, this often starts a process that, barring a change in payment ability, ends with foreclosure. With a foreclosure, the bank repossesses the home at a loss and must resell as quickly as possible, otherwise the bank will also be stuck paying the taxes, upkeep, and other associated costs for the foreclosed home until it is sold.
As a home buyer, your only reason to purchase a foreclosed home is that you will be able to buy it at a drastically reduced price. Since the bank that foreclosed on the home will also be paying for it until it has been sold, it will usually be willing to sell for a large loss. For a home buyer, this can be a huge savings. However, there can be many downsides to purchasing a foreclosed home.
Banks generally do not want to spend any more per month on a foreclosed home than is necessary, which often involves cutting as many corners as possible. While some banks may spruce up and maintain the home, others will slack on this and the home can literally be in any kind of condition inside as a result. The previous owners may have vandalized it, there could be numerous issues that need repair, and the home could be filthy or even have an infestation of some form. Some banks will let you see and inspect a foreclosed home prior to making an offer, but many banks put these homes on auction and will not let you inside until you’ve already made a bid. What may initially seem like a great price could turn into a huge expense with repairs factored in. Not to mention the hassle involved with the work it may take to rehab some of the foreclosed homes on the market.
When you’re in the market for a foreclosed home, make sure you do your due diligence, check the history on the home and if possible, get a full inspection done prior to making an offer. Sometimes you’ll find a diamond in the rough that needs little work and is selling for a steal, and sometimes you’ll find a home that just needs a few reasonably cheap repairs to be great again. Other times you’ll find a home that is a lemon and you’ll be very thankful that you proceeded with caution. Provided that you take the appropriate steps, you should eventually find a well-maintained foreclosed home at a great price.
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