Foreclosed homes are some of the best home purchase deals you can find but that doesn’t mean that you should through caution to the wind when considering purchasing a foreclosed home.
In fact, some foreclosed homes can end up costing you more money (or headaches) than they’re worth. Here’s what you need to know about purchasing a foreclosed home.
FORECLOSED HOMES ARE A DIAMOND IN THE ROUGH
The first thing to understand is that foreclosed homes are often in a rough state. This may be partly due to the fact that the previous owner was unable to make their mortgage payments, and therefore, couldn’t afford the upkeep either.
Or it could be that the previous owner was imbittered about their home being foreclosed on and abandoned the home, or even outright vandalized the property.
These are some of the main concerns when it comes to the condition of foreclosed homes:
RUN-DOWN AND UNCLEAN
Foreclosed homes are often filthy because they had been sitting unoccupied for months –sometimes years! Plus the previous owner may have also added to the grime from neglect. Vagrants sometimes will occupy empty properties as well. To be frank, foreclosed properties can be so disgustingly dirty that professional, deep cleaning is necessary.
POORLY DONE OR INCOMPLETE RENOVATIONS
In an attempt to gain more income to pay their mortgage, the previous owner may have tried to convert areas of the home into a separate living space, such as turning the garage into a studio for rent.
Permits are expensive and take time to get approved so most likely these types of renovations are done haphazardly and without necessary city permits.
MOLD AND WATER DAMAGE
The neglected home could have been suffering from a leaky pipe or storm damage. If it’s been unattended for a long time, the damage could be severe and expensive to clean out and repair.
ITEMS LEFT BEHIND OR REMOVED
The previous owner may have left personal property behind or others may have even used the abandoned property as a dumping ground. There’s also the issue of items being removed, such as a water heater or air conditioning units.
PURCHASING CONSIDERATIONS WITH FORCLOSED HOMES
FINANCING ISSUES
Getting approval for a loan on a property that is deemed uninhabitable or appraises below the purchase price is unlikely. However, if you are paying for the home in cash, getting a mortgage on a significant fixer-upper won’t be something you need to worry about.
NO SELLER DISCLOSURES
Seller disclosures let you know the history of the house and are one of the first ways to know what you’re “getting yourself into.” Since the bank is the owner of a foreclosed home and no one from the bank has lived on the property, they’ll be unaware of any existing problems. You’ll have to uncover them yourself with a home inspector.
FIERCE COMPETITION
As high as the risks are and as much work as foreclosed homes entail, they’re still an attractive investment opportunity. House flippers and investors looking for a rental property are always on the lookout for a sweet deal.
GETTING A GOOD DEAL ON A FIXER-UPPER
Foreclosed homes aren’t your only option for getting a good deal on a fixer-upper! Did you know that there are home loans available specifically for renovations? Contact us today to learn about renovation home loans and you’ll see that getting a deal on a fixer-upper isn’t such a headache after all!
