Pros and Cons of Buying Foreclosures

Foreclosures are everywhere and they are potentially a great deal for buyers.  However, you need to consider the pros and cons of buying a foreclosed home.

The Columbus Realty Team has experience buying and representing buyers of foreclosed properties.  Make sure you choose an agent with experience!

The biggest “pro” is price and profitability.  You can typically get a great deal on a foreclosure because the titleholder doesn’t want to hold onto inventory.  They are usually priced less than other listings in the area, to make sure they sell quickly.  However, most disasters occur due to over bidding on properties without properly assessing the real market value and fix up costs. Research can make or break the fortune one could make on a foreclosed property. 

Another “pro” is you have time for inspections and making sure the title is free and clear.  This isn’t the case when buying through a sheriff’s sale, where the property cannot even be entered prior to ownership.  It is recommended you use a reputable title company to search for outstanding liens and judgments.

Finally, there is no need to evict tenants because the property is vacant and the home should be empty of belongings.  

The biggest “con” is negligence of the seller.  As all foreclosures are sold in “as-is” condition, a buyer must take all repair costs into account when placing a bid on a foreclosure.  Keeping in mind if the seller who was foreclosed on couldn’t make payments, they couldn’t pay for typical upkeep either.  So usually foreclosures are in disrepair.  Always estimate repairs on the high side because of latent material defects.  The buyer must make sure he has the money available to make such repairs, or use a 203K loan.   (*See http://www.fhainfo.com/fha203k-streamline.htm for more information on 203K guidelines and information.)

Lastly, some banks can be difficult to reach or negotiate with.  Since HUD home bidding is on-line, it’s is a quick and easy process. 

All of the pros and cons should be considered when bidding or writing an offer on a foreclosed home.  Make sure you use a Realtor, who is an expert in foreclosures.  Call the Columbus Realty Team today to begin your search and start your journey!