When a homeowner is no longer able to pay the mortgage, it can be foreclosed on by the lender. The former occupants must vacate the home and the lender usually then lists the home on the marketplace. This type of listing can present those looking for a bargain with a wonderful opportunity – as long as they know what they are doing. Read on to find about some things to know about buying a foreclosed property.
It might not be habitable – You should be prepared to do some work on the home before you move in. When homeowners are not able to pay their bills, they are not as likely to attend to needed maintenance issues like leaking roofs, electrical problems, gutter cleaning, and more.
You might have lending issues – Depending on the type of mortgage you are applying for, you could run into approval problems if the house is in very bad condition. Government mortgages, in particular, often require that the home is in good condition, have floor coverings, and that all major systems are functioning. Luckily, some of these lenders make an improvement loan part of the deal and the needed issues can be addressed before you move in.
There may be unknown preexisting issues – Under the terms of a normal real estate sale, disclosures are mandatory. Disclosures are information provided to a potential buyer about the home and can include everything from prior storm damage to crimes committed in the home. With a foreclosed property, you might be buying the home "as is" and that means you won't know much about the history of the house without doing your own detective work. You can ask a local real estate agent about the property, quiz neighbors, and do some internet searches, but there are no legal provisions for the lender to disclose anything with a foreclosure.
Foreclosure deals attract other buyers – You should be prepared to act fast on foreclosed properties. The trend to "flip" distressed properties has prompted buyers to aggressively stalk foreclosure listings and pounce on the best properties quickly.
Consider the effect of intentional damage – Homes that sit vacant can fall victim to squatters, meth-makers, and bored teenagers. Intentional damage caused by the disgruntled previous owner is not unheard of, so be sure to check the wiring, plumbing, copper pipes, appliances, and bathroom fixtures carefully.
The best way to proceed with any property for sale is by speaking to a real estate agent. They can locate great deals, advise you about what to pay, and research the home's history.