Buying Foreclosures – Great Deal or Insane Hassle?
In much of North America, the home market is a buyer’s market, which means that buyers have many homes to choose from, at a price they can almost name, which bodes well for anyone looking to get a deal. The problem with buying foreclosures isn’t so much that they’re in disrepair, but because:
1. Investors are fast
Investors have a lot of money to play with, and already have established relationships with banks and Realtors. As unfair as it seems, they often known about foreclosures before the rest of the home buyers do, which means that when there’s a foreclosure left, it’s either been deemed as a bad deal by investors, or the bank has refused to negotiate on price. In either case, this means that if you’re patient, you might be able to get a deal, but you’ll probably be looking at a lot of effort on a small amount of movement.
2. Banks are slow
The true problem with foreclosures is that banks seem content to sit on them and let them collect dust. And even when the bank is ready to move the home, there’s so much red tape that most buyers grow tired of playing the game and move on. If you are ready to work on the bank’s schedule, then buying a foreclosure might be a great way to get your hands on a deal, but you have to be patient.
When Foreclosures Work
The best time to buy a foreclosure is right before the bank takes the home, which is when the homeowner is completely out of options, and is looking for a knight in shining armor. Smart buyers might be able to snag houses like this at great deals, without having to worry about dealing with a bank. However, you’ll have to wade through dozens of homeowners before you find one that has enough equity to make a sale easy.
Security Precautions
One final important note: when buying foreclosures, make sure that you buy title insurance to protect yourself from an issue where the bank might not have a clear title. This is rare, but when dealing with auctioned homes, it happens more than you think.
Also, make sure that you have a licensed inspector check the home for problems. Most of the time, it will be impossible to secure a loan on a home in disrepair, which means you either need to repair it, or pay cash. This is where home flippers make their money.
Are you shopping for homes and want to know how much you can afford to pay? Take a look at our free mortgage calculator & mortgage quotes tool, which you can use to determine exactly how much home you can afford and/or how much to offer for that foreclosure property you’ve been eyeing. Our free mortgage quotes form will also show you how to get five free mortgage quotes from local lenders. You can use these to comparison shop, or just to see where you stand with the lending market. It’s free, and it’s a great way to get your home buying process started.