Purchasing a foreclosed home is completely different than purchasing a typical home. It may look like a dream offer as it generally comes at a cost that’s lower-than-normal property prices. However, you may not be aware of the various challenges and risks that it entails. If you’re venturing into this type of purchase for the first time, you need to understand the risks and challenges involved. Usually in such a case:
- Before accepting the proposal, the seller requires a preapproval letter from the lender.
- There is barely any room for negotiation.
- All repair costs are the responsibility of the buyer.
Mentioned below are some crucial things that you must be aware of before deciding to purchase a foreclosed property.
Ways of purchasing foreclosure
There are two major ways in which you can buy a foreclosed property. The first way is at auction. Here the lender auctions off the property publicly to get their money back after the owner of the house has stopped paying their mortgage. The second way is when a foreclosure has already happened, and the bank or lender has won the property at the auction. Now the property is put on the market for sale through a local real estate agent in hope of selling quickly to recoup as much of their investment as possible.
Purchasing a property at auction is tough
Purchasing any property at an auction can prove daunting. In this scenario, you need to first outbid the professional real estate investors who are looking to purchase and make a profit. If you manage to win the auction, the transaction requires a cash payment.
Foreclosure auctions are sight-unseen
You’re unable to tour the property before placing your bid at auction. That means that you’re placing your bid sight unseen. The house might require extensive repair and the auction amount may also have climbed high. Thus, your initial cost has become extremely high for the property which may exceed your budget or can even prove not worth the price. Even if you consider selling the property, you might not be able to recoup your entire invested amount.
Purchasing a bank-owned foreclosure is a better idea
Reports show that purchasing a foreclosed property from the bank is not only an easier process but also a more cost-effective option. The sale is almost like a regular purchase sale. First off, you have the opportunity to inspect the property. This helps you calculate the repair cost, then you can make an offer to the real estate agent who has been appointed by the bank. They’ll present your offer to the bank, which can then make a counteroffer if not satisfied. The agreement moves forward when both parties have negotiated to arrive at a profitable deal for both sides.
When dealing with any foreclosed property, you safeguard your investment significantly if you get a professional and experienced real estate attorney to help you out.
Are you interested in hearing what an attorney has to say about your situation? Contact us today!