What to Expect when Buying a ForeclosureFirst and foremost, the auction is one of the worst places to purchase a foreclosed home. It’s here where the opening bid starts quite low, but, rapidly increases. Caught in the excitement and fever of the moment, potential owners up the ante, exceeding their budgets in the hopes of making up money some time in the future. One of the best times to buy a foreclosure is well after the auction, when the property failed to sell. Those months of lingering are nothing but a drain on the bank and become less attractive to traditional buyers who want a fixer-upper.
Buying a foreclosed home is a little different from buying a typical resale. In many cases, only one real estate agent is involved. The seller wants a preapproval letter from a lender before accepting an offer. There often is little, if any, room for negotiation. The home comes as is, and it’s up to the buyer to pay for repairs. On the upside, most bank-owned homes are vacant, which can speed up the process of moving in. —Bankrate.comOther investors might also pass these types of properties over as well. The real trick is not only finding a salvageable and salable property, but knowing the true costs involved to get it in shape and ready to sell or rent. What’s more, it’s not only the condition of the home that’s a concern, but also, things such as liens, property taxes, title defects, and so on. If you can find a property that doesn’t have such encumbrances, you’ll have to also expect the following when buying a foreclosure:
- Junk galore. We’re not just talking about furniture that’s been left behind, but also, appliances, odds and ends, personal effects, the list goes on and on. In many instances, any furniture and/or appliances that are still inside will be worthless. You’ll need a junk hauling and property cleanout service to clear everything out to start the renovation process.
- Electrical wiring. It’s a good idea to get a home inspection and also to call-in an electrician to check the wiring, especially if it’s an older home. You’ll want to be alerted to replacements, upgrades, and the like to know how much these will cost.
- Plumbing. Water, drain, and sewer lines that haven’t been used in many months could have some very nasty surprises in-store. Have a plumber inspect all these and be sure to learn of the extent of any damage, which can include blockages, leaks, and serious corrosion.
- Structural issues. All home “settle,” as do homes that are unoccupied. The difference, of course, is there’s no one present to see structural problems as they begin to occur. The foundation could be compromised, walls cracked, and ceilings warped.
- No basic maintenance. Because the previous owners could not pay their mortgage, it’s a good bet that even if they had the cash on-hand to make repairs and do basic maintenance, they opted not to spend on a home that won’t be theirs for long. Landscaping, pest infestation, mold, mildew, and much more are all likely to be found.