Buying foreclosure property is slightly different from buying a typical resale or constructing one from scratch. You need to be extra careful when approaching such an offer because the "good deal" on paper may not necessarily translate to savings on your part at the end of the day. The only way to determine if it is really a nice offer is to compare the foreclosure property pros and cons before making any decision.
Pros
-The obvious benefit to buying a foreclosed home is that you can get it at the lowest possible market price (that is if you do your homework). Actually, sometimes you could get a house for 50% or less than the market price.
-If you’re lucky to find a short-sale property, you may be in a position to capitalize on the seller’s sense of urgency to negotiate for a much better deal. Also, if the property is not bank-owned, you can take your time to perform inspections when the property is still pre-foreclosure.
-If recent past trends are anything to go by, buying through foreclosure can save you about 15% off traditional sales as the homes are priced with the cost of repair and rehabilitation in mind. In fact, you can buy a foreclosed home, rehabilitate it and then wait for property prices to rise and re-sell it for profit.
-The best thing about buying a foreclosure home is that all transactions are done in business-like fashion. No emotional issues are involved and the buyer, seller and lender only need to agree or disagree to the terms of the transaction.
While there are many pros to buying foreclosure property, there are still a few cons to it.
Cons
-The main disadvantage with this method of owning property is that you buy the home “as is where is”. Yes you may perform an extra-thorough inspection on the home but this might not always give you a clear picture on what to expect once you’re the owner. In the end, the discount that attracted you to the deal might wind up costing more than building from scratch.
-In some cases, you may receive a Special Warranty Deed instead of the Buyer’s Title (especially if the foreclosure is still under review). In such a situation you need to invest in a good title insurance policy to protect your interest just in case the foreclosure is overturned and the house goes back to the original owner. This of course means additional cost burden.
Bottom Line
Investing in a foreclosure property has its fair share of pros and cons. And while the merits might heavily out-weigh the demerits in some cases, it is always advisable to cross-examine the deal before accepting any offer.
Yes there are many good deals out there, but there are also quite a few albatrosses to watch out for!
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