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What should I know about buying a foreclosed home?

On Behalf of | Feb 14, 2024 | Real Estate Law

It is natural to want to find the best bargains available on the real estate market, and you may have heard that buying a foreclosed house can save you money. Homes lost to foreclosure often sell for a significant discount since banks are eager to rid themselves of the properties.

Like any real estate purchase, buying a property that has gone through foreclosure has both positives and negatives worth considering.

Lower prices and concessions

The major perk of buying a foreclosed home is the potential to purchase a property well below market value. Lenders often want to sell foreclosed properties quickly, so they generally price them aggressively, saving you possibly tens of thousands of dollars compared to purchasing a similar home that has not experienced hardship.

A lender may also offer more perks to speed up the sale. For example, a bank trying to offload a foreclosed property may go ahead and pay the commission of your real estate agent. Other concessions may be available to your benefit.

Repair concerns

The problem with foreclosed homes is that they frequently require expensive repairs and renovations. Properties lost to foreclosure often suffer neglect by previous owners facing financial hardship. These homes may have outdated systems, cosmetic damage and pest infestations.

Lenders often offer these homes as-is, so you probably cannot insist on repairs before you buy the property. Therefore, money you save on a bargain price can end up lost due to high renovation expenses.

Other complexities

Additionally, purchasing a foreclosed home is more complicated than a standard sale. Navigating auctions, dealing directly with lenders and buying properties sight unseen can be a challenge, especially for first-time buyers. There is also the added risk of acquiring debts from the previous owner or liens tied to the home.

Foreclosed homes can appear attractively cheap but may ultimately cost you more in repairs or hidden fees. Careful research into the state of a foreclosed property should tell you whether or not a purchase will truly be worth it.