Compared to buying a standard home, there are a lot of risks associated with buying a foreclosed home. You have to decide if taking risks will be worth it or not. Here are the disadvantages of purchasing a foreclosed home:
Period of Redemption – Homes are foreclosed by the bank when the owner can no longer continue to pay for the mortgage. However, they are still given a period of redemption or a chance to clear their balance mortgage and also continue the repayment of the loan. This only means that not all foreclosed homes are eventually being sold. Some might still have the chance to get taken back by the homeowner.
Sold As-is – Most foreclosed homes are sold as-is because the bank’s primary concern is to profit from it as quickly as possible. Not all foreclosed properties need repair, but you have to shoulder the repair cost just in case it’s necessary.
Expensive Maintenance Costs – The most common reason a house is foreclosed is the lack of financial stability, which means they most likely lost the capability to maintain the house. Especially if they already know that they’re about to lose their home, there is no need for them to fix any problems or add value to it.
Squatter’s Rights – Just because a property has been foreclosed legally, doesn’t necessarily mean that it is empty. If a foreclosed home is not sold for a long time, it will most likely attract squatters that you cannot easily evict. The squatters may not have a claim to the house, but you are still obliged to request eviction legally. The process will cost money and take a long time to be accomplished.
Taken to Auction – Auctioning a foreclosed home is the most common way to regain the investment fast. Before the buyer gets the deed, the bidding price needs to be paid in full. The insuring and appraisal process takes time, so an auctioned home has no mortgage loans.
The low price of a foreclosed home might look tempting, but you have to be careful in deciding to go for a foreclosed home. You might think you’ve saved some money but get surprised by future expensive repairs.