Why Not to Buy Foreclosed Home?
Foreclosed homes have been a good source of investment for price pinching home buyers. They’re available for cheap and hence considered a great bargain. You just have to undertake some repairs and put the property for sale/lease and make some extra income in the process. To all those who think that foreclosed homes are better than custom homes, here are some reasons why you should exercise caution and restrain when buying foreclosed homes;
a) The potential rewards do not compare to the potential risks involved in the property. You aren’t aware about the details of the occupants and the condition that the house was subject to during their stay. Banks don’t usually do not allow home buyers to inspect the property, thereby making it difficult to assess the damage. Many a times the property is left as it is. The pervious occupant may not have maintained it properly. He may not have paid attention to the plumbing, carpentry, electrical works, making it a dangerous and expensive proposition. Renovating the job would involve removing current appliances, fixtures and fittings. And in some extreme cases, the previous owner may have also vandalized the property.
b) The property has been sidestepped by real estate professionals. Is your decision/experience better than his? Real estate agents probably know about the property more than you through word of mouth and have considered the price to be very expensive, the house to be too damaged or some other valid reason.
c) You are probably going to pay more than what the house is worth. Banks would obviously want to make as much money as possible from the deal and bridge their loss. They would try and sell the house for what it more than worth.
d) As earlier said, most banks do not allow home buyers to inspect the house. Does it make sense to buy a property without inspecting it? The property may have been vandalized by its old owners? Banks do not give defaulting home owners sufficient time to take their belongings. This often causes them to come back and break open doors and windows to retrieve their possession. Sometimes these homeowners may even remove some valuable items, just to have revenge on banks.
e) Financial dealings in foreclosed properties aren’t always as straightforward as they seem. First and foremost, lenders may not agree to finance a home that cannot be inspected. The process is often delayed due to unending formalities.
Foreclosures are a good option only for those investors paying from their own pockets and willing to risk it. The best alternative for others is to invest in custom built homes. These can be built in less than 90 days and at costs less than what you would pay for a foreclosed home.
