It is a great idea to buy a foreclosed home; not only do you get a great price but also you have the opportunity to flip if with minor repairs or rent it to serve as a investment property.
However, before you decide to make any plans on buying a foreclosed home you should have a clear idea of these five key points and potential pitfalls of buying a foreclosed home.
1. Why is the property Foreclosed?
Never make assumptions while dealing with foreclosed homes do as much as research as possible. Majority of the times homes are foreclosed as the homeowner defaults on his loan payments, the owner receives several “notice of default” letters from the bank.
If the owner fails to come up with the delinquent payments or does not work out a payment program with the mortgage lender, the bank will send a final letter informing the owner the property will be put up for sale in 21 days.
Often once sold the property is legally owned by the buyer and they may have to take immediate possession and the past homeowner—who might still occupy the property—does not have much time to take stock of the situation.
2. Pre-Approved Loan
To take advantage of the perks a foreclosed has in store to ensure you will be the buyer a pre-approved loan is crucial. Generally it is a letter stating proof you have the funds to purchase a foreclosed home.
3. Foreclosed Home Deposit
Generally you would pay a deposit towards a home you decide to buy after the bidding process. In foreclosures however the deposit amount includes the loan balance, associated lawyers’ fees and any other costs connected with the foreclosure. Often cash or cashiers cheque are the way way to pay as the bank is looking for quick returns.
4. Property Inspections May Follow Purchase
Generally buyers should make a decision only after viewing the property to avoid any surprises. The major pitfall areas are plumbing and electricity verify their condition and if needed work to repair and replace. Take a professionals assistance to get expert opinion.
5. Do Your Homework
If you’re interested in purchasing a foreclosed home take time upfront to evaluate the lists of homes and work a bid carefully, as banks will want to choose the highest bid. If you keep these caveats in mind, you may end up the proud owner of a wonderful piece of real estate.