When a bank forecloses on a property, they will usually put the house up for auction. There are advantages and disadvantages to purchasing a foreclosed home. You have to take all of these things into consideration before you decide that this is the best route for you to get the home that you would like to purchase.
Low Price- A home that is being sold at auction because of foreclosure is generally going to have a far lower price at final sale. The price at auction only has to be as much as what is owed to the bank on the defaulted loan. The price can be a fraction of what the house is actually worth depending on how much equity was in the house when the loan defaulted.
Quick Move In- Your house will be ready to move in to fairly quickly. The previous homeowners will be out of the house long before the house actually goes up for auction. That means that you will be able to move in soon after you make the purchase. This is one of the better advantages of purchasing a home that was foreclosed on. There are no long waits to move in.
Profit- If you choose to sell the home at a later date, you will likely make a great deal of profit over what you actually had to pay for the house in the first place. Many people purchase homes at a foreclosure auction in order to make necessary repairs to the home and then turn over a profit in resale. It’s good business sense.
No Previews- You will likely not be able to see the house before you bid on it. There is a chance that the house could be in poor condition. It is much like when a car owner knows that their car is going to be repossessed. They take it out and tear it up because they are upset about the impending loss. Homeowners often do the same thing. They will cause intentional damage to the home because they are upset about the fact that it is going to be repossessed soon and they don’t want to give the bank the advantage of making more from it. The truth is, they are only hurting the people who will be purchasing the house because they are the ones that will have to make the repairs. That will by you if you decide to purchase the home.
Cash on the Spot- If you purchase a foreclosed house at auction, you will have to come up with cash on the spot. You won’t be able to wait to see if you get a loan. You will have to pay it immediately and that could be difficult depending on how much the previous homeowner still owed on the house. If you go to an auction, make sure that you come prepared with a way to pay for the house.
Not Enough Time- Most people take a long time to consider the house that they are considering to buy. When purchasing a home, it is nice to know what the house is like. You would normally get to walk through the home and see and potential problems, size of rooms and other things like that. When you are purchasing at auction, you won’t necessarily have the chance to do this. That can be a great disadvantage because it’s like walking through a dark hallway without knowing what might be lurking there.
These are just some of the advantages and disadvantages when buying a foreclosed home. It can be very profitable and save you thousands of dollars over buying a house through a real estate agent just because the owners are moving. Foreclosure means that someone lost their home and this is one of those cases that you could actually do well in taking advantage of.