Do you believe in surprises? Buying a foreclosure home is just like a diamond in the rough! Yes, you heard me right! Foreclosure homes have to ability to offer you some real surprises! I mean, just imagine, getting a beautiful house in your favorite neighborhood on your budget. Isn’t that amazing? Who doesn’t like these kinds of surprises well I do!
If you want a home in a popular neighborhood but are not sure about the prices? Well, if you are lucky enough, you might get home there as a foreclosure home! As Covid is at its peak hopefully, you can get some better options!
According to Statista, in the year 2020, the foreclosure rate was reported 1.16%. However, other reports also show that the foreclosure rate is still increasing.
Well, it’s crucial to understand why and how can you get a foreclosure home. As foreclosure homes can be a real surprise for you! In this blog, we are going to talk about buying foreclosure homes can be a good experience for you or not?
How does it look like to buy a Foreclosure home in Florida?
Foreclosure homes are those homes that are available for sale, owned by lenders or banks. Lenders/banks foreclosed homes when the homebuyer stops making the monthly mortgage payments that result in seizing the ownership of that particular house.
Now, banks/lenders sell these houses even at low prices, and that’s an enormous benefit while buying a foreclosure home. Yes, a foreclosure home can do wonders to you by offering you a home that looks over budget in the past but now you can get it!
However, there are several risks contained while buying a foreclosure home but it’s worth taking the risks when you are getting a home in half of the prices! Moreover, you are free to negotiate when it comes to a foreclosure home, you never know you might end up having the best lowest prices!
Buying a foreclosure home at auction is worth trying or not?
If you are asking this from me, I will say well it depends if you are ready to take a risk then why not. Who knows, an auction home can do wonders for you!
Buying a foreclosure home at auction is a bit different from regular home buying. However, it’s an extremely traditional way to acquire a foreclosed home. Auction is a great way to find a quick house.
You can get the home even at low prices, but you need to get the cash ready as auction homes only accept cash payments. Well, that means you cannot finance their homes.
“Keep in mind that whatever you are buying from there will get a risk involved in it”. As you need a pre-approval ready, all pre-approval is the same. Here is our pro tip: Keep your pre-approval ready when your earnings and assets are verified. The second risk can be high repairs you need to get indulge in high expenses to fix the repairs of your foreclosure home.
However, every coin has two faces. Here is the second one, you may end up owning a home in a prominent neighborhood, where you were planning to buy for a couple of years? Yes, this can happen right!
This is the outstanding perk you can get while buying foreclosure homes.
Is it a bad idea to buy a foreclosure house?
Well buying a foreclosed home can be a good decision if you have a strong financial profile or you are ready to take some big risks in your life. What makes buying a foreclosed property risks? Hence, we have highlighted some advantages and disadvantages of buying a foreclosure home. So that you can make a decent decision when buying a foreclosure home. So please have a look!
Advantages of buying a foreclosure home
First, let’s talk about the various advantages you will get while buying a foreclosure home. Let’s discuss them one by one.
- Quite obvious, you can get a home at lower prices in some over-hyped areas where you can establish your wealth where you are ultimately paying less and achieving high.
- You may get an opportunity to buy a house in a good locality where the schools or shopping complexes are near to you.
- Sellers with pre-approval are committed to doing fast sales, by this, chances are less of harming your credit score.
- Traditional home loan options are also available for you, whether it could be FHA loans or conventional loans to get the finances.
- If you buy a home at auction, then you have the choice to avoid the inspection and financing eventuality.
- Cash payments requirements can help you to lessen the amount of rivalry.
Disadvantages of Buying a Foreclosure house
Honestly, buying a foreclosure home can be a bit riskier than investing in a usual house. Anyway, here are some of the disadvantages that you need to know before investing in a foreclosure home. Let’s discuss them one by one.
- One of the most usual risks is you will get a house where you need to invest in repairs and maintenance. On the contrary, several lenders will do required repairs before registering for a foreclosure home.
- Chances are you will not get privileges or the closing cost loans for foreclosure as the lender normally doesn’t accept the seller grants.
- If you buy a house from an auction can lead to high repair costs getting the quick house at low prices in return.
- You will not get the seller disclosure report which contains the history of the repairs. As the lender has never got the chance to use the house.
- The other risk is that the property is being taken by the settlers. Now the new owner has to remove it.
- Most of the times banks book the right to buy a property at an auction, especially when the bids go down at the minimum prices.
- It’s not necessary that the property you will get, be situated in the best location. You may face difficulties while renting or considering reselling the house.
Is it cheaper to buy a foreclosure home?
Yes, you can go for a foreclosure home, as you can get a home at low prices may be at a good location. Means a cheaper home in a different area where you can often find a good deal.
On the contrary, chances are you will get home which had some serious damages and other concerns which normally sold as in condition. In a few cases, the lender fixes the issues and then is listed in on the auction.
So, chances are equal to getting something good or getting something bad. Hence, if your finances allow you to bear risk, then go for it who knows what the future holds for you!
Buying Foreclosure homes process
The foreclosure home buying process differs greatly from the usual home buying process. So, let’s dig into the home buying process.
Figure out where you want to buy a foreclosure property
So, here you will have three options usually where you can buy a foreclosure property. Now you need to decide which option is going to work for you. Let us remind you all three options involve risks.
- You can buy a foreclosure home in a quick sale. A quick sale takes place when the homeowners are willing to sell their homes for some urgent money requirement, etc. Buying a foreclosed home means it is necessary to approve your offer from the bank.
- Here is the second option “auction” where you can get a quick home. Accordingly, you can negotiate the prices with the seller, just keep your cash handy as most payments will be accepted in cash only. Nonetheless, sometimes you can get an option to finance the foreclosed property.
- The last option is to buy from the bank. Banks typically remove the title along with the existed homeowner before buying a foreclosed property. On the other hand, the bank does not sell the property directly to the homebuyers. Buying from a bank allows you to see a property before buying it!
Search and work with professional real estate agents
The National Association of Realtors (NAR) presents a short sales and Foreclosure Resources Certification (SFR) particularly for the real estate agents who have specialized in short sales, foreclosures, and for the REO property.
- Find a real estate agent who holds prior knowledge and experience in the foreclosure process.
- Real estate agents who are known how to qualify the sellers for short sales and bargain with the lenders.
- Find a real estate agent who believes in defending the buyers.
Discovers the foreclosures for sale options
- Do not completely rely on our real estate agent for searching the foreclosures. Explore at your end as well. Well, nowadays it has become easier to discover foreclosures in your era.
- However, we have written some of our recommendations for you.
- HUD is the authentic government site where you can find all the foreclosure properties.
- Fannie Mae Homeopath is again an authentic website. It’s good to discover the foreclosure sites aka “homeopath properties”.
- Real estate Diary is our recommendation where you will find all the foreclosure properties listings.
Acquire the approval for the mortgage
Buying a property from the foreclosure auction, chances are you will get the financing options. You need to get approval when you started looking for a foreclosure property. Here pre-approval will help you to get an idea of “how much you can get as a home loan.”
Appraisal and Inspection
An appraisal is known to be a lender’s demand that lets you know how much fund property is worth. It’s crucial for lenders as well to know that they are not loaning plenty for you.
Whereas an inspection means a close look at your house. As foreclosure normally has more damage than a usual home, that is why inspection is needed where an expert inspects the home Before buying an actual foreclosure home.
Buy Your Foreclosure home
Understand and review your appraisal and inspection reports clearly and figure out whether you want to buy a foreclosure home or not? If your answer is yes! Contact the lender and settle your loan and go for the required renovations. Remember, do not jump into the foreclosure process without a professional real estate agent!
Conclusion:-
Buying a foreclosure home is a personal choice of an individual. However, there is a definite level of risk involved in buying a foreclosure home. Accordingly, if you have a good real estate agent who makes you comprehend the foreclosure Process easily than it’s worth taking a risk! Yes, buying a foreclosure home will give you access to instant equity! At the last, if you want to bid on an auction then coordinate with those people who totally understand the foreclosure process. Although it’s a great idea to get a house at an auction. Whatsoever the risk as you are paying for a house but remember sticking your nose out doesn’t always mean to bear losses maybe you could end up having a good deal!!
Frequently Asked Questions:
Is buying a pre-foreclosure a bad idea?
Buying a pre-foreclosure home is not a bad idea. Instead of a bad idea, it is like an opportunity to pay a lower than your market price. You will also face less competition than you bought if you would buy a foreclosure home at auction.
What are the downsides of buying a foreclosed home?
Increased maintenance issues, lack of certainty and timeframe, condition, and price are the most common downsides of buying a foreclosed home.
Why is buying a foreclosed home bad?
Buying a foreclosed home is bad because you will not get a chance to have the home inspected. Moreover, you will not have stepped in the door before you become the legal owner. It is possible that the house has been vandalized or looted and appliances and light fixtures may be missing.
Do you need to buy a pre-foreclosure home with a loan?
Yes, you can get a loan for your pre-foreclosed home. However, if there is competition for the house, it will be feasible to go to the cash buyer first. Then, you will know how much you can allow for the house and any repairs. Banks are always pleased to give loans on properties even if they are not listed for sale.
