Low interest rates and a large inventory of foreclosed homes seem very attractive for those looking to buy a home for a low price. Whether you are an investor who is looking to make a profit or a simple home buyer looking for a home for his or her family, foreclosed homes are a great alternative to buying regular homes. However, low prices can quickly make you forget some essential home buying aspects, and you can quickly end up with an expensive problem on your hands. You can get some really great deals on foreclosed homes, but you should pay even more attention than when buying a regular home.
Buying a foreclosed home requires a certain degree of experience, in order to protect yourself from buying a home that will require extensive repairs or has some major issues. Here are a few tips that you need to keep in mind when buying a foreclosure.
1. Don’t expect to find out a lot about the home. Foreclosed homes are owned by banks and there won’t be any disclosures when buying such a home. You won’t know who lived in the home before or what kind of people they were. Unless you do some research on your own, you won’t be able to tell what kind of neighborhood the home is located in. You are pretty much buying a home blindly, without finding out too much about the property’s past or present condition.
2. Hire someone who is specialized in foreclosures. Buying a foreclosed home is different than making a normal home purchase. Hiring an agent that specializes in foreclosures can make this process significantly easier and save you from some trouble. When making a purchase like this, you need to move quickly and have all the paperwork ready when it’s needed. A real estate agent specialized in foreclosures can be of great help with having everything ready on time. A professional can also use his or her contacts in order to help you find more foreclosed homes than you would on your own.
3. Have financing available before you start looking at foreclosed homes. Just like you would when purchasing any other home, you should be at least prequalified for a loan before shopping around. By doing this, you will know how much you can afford to pay for a foreclosed home, which will make searching for the right one much easier. More importantly, you will be able to make the purchase much quicker, and lower the risk of losing the home to another buyer.
4. Prepare for repairs and improvements. Many home owners whose homes were foreclosed might have left the home in a poor state, or even stolen some of the appliances or fixtures. You, the buyer, will be responsible with home repair and replacing all of the missing or broken appliances and fixtures. An alternative would be to apply for a 203(K) mortgage, which is designed for those who are buying a home that is missing certain elements, like toilets, or needs other repair work.
5. Determine if a foreclosed home is right for you. Especially if you are a first time home buyer, buying a foreclosed home might not be your best option. Most people, especially first time home buyers, generally want a home that they can move into without having to do many modifications or repairs in the beginning. Most foreclosed homes will almost always need some sort of repairs or improvements, so you should ask yourself if that is something that you are willing to do before buying a foreclosed home.
Foreclosures can be good deals as long as you know what you are doing, and have proper knowledge of the process of buying a foreclosed home. You have to know how to prepare for such a purchase and what problems you may encounter in order for this to be a great alternative to making a regular home purchase.