While the housing market in most places certainly has improved and the number of foreclosed homes on the market has decreased, there will always be some foreclosed homes available for purchase. However, because of popular television shows on house “flipping” and investment real estate, many buyers have unsubstantiated ideas of what buying a foreclosed home truly entails. Here, then, are some myths and truths about buying a foreclosed home.
It’s a hot deal
Many buyers believe that foreclosed homes are always for sale at very low prices. The truth is that while forclosed homes may be discounted somewhat, the massive discounts people sometimes expect are unrealistic. While the “discount” may be well below what the former owner paid for the home, because of the changes in the market itself, the discount compared to other similar homes in the area may be more modest. So, if the home is a “good deal” and does not require a tremendous investment to return it to a livable state, there is nothing to stop you from buying it.
Before making an offer to buy a foreclosed home, make certain you’re aware of the possibility that there may be additional hidden costs that are not often known or disclosed in advance. While the foreclosure removes the former owner’s mortgage debt, the home may have liens against it for back taxes, or money owed to contractors or subcontractors. A thorough title search should be run during the attorneys review period which will reveal this type of information. An experienced real estate professional can help you uncover any financial challenges associated with past judgments and liens.
While it is a myth that most foreclosures are homes where the owners simply walked away, it is true that foreclosed homes may need some extra care to return them to their former state. When the original owner loses a job or has a financial or medical disaster that eventually leads to the foreclosure, their attention to maintenance and detail may decline simply because they are unable to either hire professionals to do the work, or do the work themselves. In addition to that, because the banking industry was slow to begin selling distressed properties, the home may have remained empty for several months, or even years. Homes that endure several seasons without the electricity on, for example, may be subject to mold and other environmental issues, and homes that rely on a sump pump to keep water from seeping in may have damage to basements or main floors. Roofs may have undetected storm damage or problems from backed-up gutters. Additionally, major mechanicals such as air conditioners and furnaces sometimes break down from lack of use.
While some angry owners may vandalize a home they are losing, for the most part, destruction is usually due to the home being vacant. Opportunistic thieves believe that no one will notice missing light or plumbing fixtures, paver stones and other easily accessible objects. The cause of broken or cracked windows can range from a stray baseball to a major hail storm. Damaged gutters can result from falling tree limbs and broken wiring might result from rodent infestation.
A thorough home inspection should be done before you buy any home, but is even more imperative if you’re considering buying a distressed property. I can connect you with a licensed, professional home inspector who can give you an unbiased report of what your potential new home or investment needs. I can also help you make sure that your “hot deal” really is a great deal for you.