U.S. housing market is witnessing a fall in the mortgage rate consecutively for 6 weeks. Now when interest rates are at a new low, foreclosure home inventory is surging like never before. As per foreclosure report of RealtyTrac for Jan’14, 1 in every 1,058 homes in the U.S. received a foreclosure filing. Foreclosure rates are highest in New York and New Jersey, the two most densely populated areas in U.S.
Foreclosures might be unhealthy for the nation’s economy but it is definitely good news for the buyers. Right now, it is definitely a buyer’s market. Probably it’s the best time to buy a foreclosed home. Though foreclosed property comes at ultra-low prices, buying such homes is not a cake walk. It can be grinding at times.
Here are a few things you need to keep in mind before you take the plunge and buy a foreclosure home.
1. Check Before You Buy – One of the pros of buying a foreclosed home is that, more often than not, it is vacant and bank-owned; thus moving in is relatively easier and faster. But this often tempts the buyer to take their home buying decisions in haste. Moreover, these properties are mostly sold in auctions, often unseen and uninspected. You should always make it clear to the seller that you are going to zero in the property only after a thorough home inspection. Always double check such property for any plumbing, wiring or fixture issues. For an average homebuyer, getting to discover such damages later, will be nothing less than a disaster.
2. Get Ready to Pay More – The reason why a home is even foreclosed at the first place is that the owner couldn’t afford the payments anymore. More often than not; foreclosed homes have a troubled history. Minor and major damages are common and often come from the last owner. Most of the foreclosed homes require substantial repairs. So when you go for a foreclosed property, be sure to keep a fraction of your budget aside for repairing and maintaining the home.
3. Get Geared Up to Evict the Existing Homeowner – As a foreclosure home buyer, you might have to share a responsibility with the seller to get the existing homeowner evicted. In many unfortunate instances, the owners leave with a grudge and often cause intentional damages to the property before handing it to the buyer. If you are not experienced with the legal aspects of the eviction processes, you better hire a lawyer to handle it for you.
4. Do the Math – Most of the foreclosed properties are bought by low budgeted first-time home buyers. For such buyers, finding the house takes precedence over the financing part. But you should know that financing a foreclosed property is far trickier than financing a regular home. It’s not hard to understand that lenders shy away from giving money for a foreclosed home as it appraises below its price. The reason is obvious; such homes are subjected to neglect or vandalism, thus lowering its value. So, as a buyer you need to be financially self-reliant rather than relying on a lender.
While foreclosure houses come at ultra-low prices, they are not for everyone. But if you are willing to take the financial risk and fix the damages, it proves to be a deal worth every penny. But if you happen to be an inexperienced homebuyer and end up buying a foreclosed property without due discretion, chances are that you might have to foreclose the property in the future. Going by the above handy tips, the homebuyer can avoid the pitfalls of buying foreclosed properties.