As we mature, we consider several future plans and opportunities that fit our wants, needs, and desires, or basically our requirements for surviving. The big question becomes; Is buying a foreclosed property a good idea?
While the question above is yet to be answered, a clear introduction to help understand Foreclosed Properties would help get the needed answers.
WHAT ARE FORECLOSED PROPERTIES?
Ever wondered what happens to properties repossessed by banks or lenders due to owners or borrowers not paying their mortgage payments?
After repossession, the bank or lender puts it on auction, a foreclosure auction, to be precise. These properties put up for auction by banks at foreclosure auctions are called foreclosed properties.
TYPES OF FORECLOSED PROPERTIES.
The Bank-Owned Homes and Real estate owned are the two types of foreclosed homes.
Bank-owned homes involve the legal processing to remove the owner or borrower from their homes due to non-payment. In the simplest form; Bank-owned homes are properties collected by the Bank after non-payment of loans or continuation of mortgage payments by the owner.
It is also known that bank-owned properties are Foreclosed homes, and the auctioning of these properties is to regain the money not paid by the borrower or owner.
REAL ESTATE OWNED (REO)
Foreclosure essentially gives full ownership back to the bank, which makes it bank-owned. When a bank-owned property is put up for auction and isn’t sold, it is regarded as REO property.
The bank trying to get such property sold to recoup its money involves a real estate agent reason for the name REAL ESTATE OWNED. Several REO agents are available to help with foreclosure listings.
A common similarity between Bank-owned homes and Real Estate Owned is their complete ownership by the lender (the Bank). The difference is the stage of foreclosure they are in.
In figuring out whether buying a foreclosed property is a good idea taking into the following consideration will surely be of help: the pros and cons.
There are several advantages to buying a house in foreclosure, and it could help determine whether to venture into it or not.
YOU CAN GET IT AT A GOOD PRICE
There’s a high chance of saving more money than you intend to spend when you get a foreclosed property.
Being smart and dealing right can help you there. But you must keep in mind that you could spend even more on repairs and renovation.
REO and short sales are more negotiable, which could fit your home of choice into your budget.
You can have the home inspected or have an appraisal done to make sure you know what you are getting. To get a mortgage for an REO property is also plausible.
LOWER NUMBER OF COMPETITION FROM TRADITIONAL BUYERS
Traditional buyers rarely compete for foreclosed properties, which could serve well in your favor. Investors, on the other hand, are your main competitors.
HUGE POTENTIAL FOR A RETURN ON INVESTMENT
Buying a house below its estimated value is a massive return on your investment.
If you want to be on the safe side, looking into REO or short sales properties, which offer a tour of the property, can help you know what you’re getting, other than buying from a foreclosure auction.
For every advantage, there is a disadvantage.
A particular drawback is the home structure and interior’s uncertainties because you cannot inspect the foreclosed property. You clearly would not know how badly the damages are, and repairs may cost more affecting your budget.
For these reasons and more buyers preferably go with REO homes because they can be inspected. The bank’s delay could also be a factor as they sometimes take a long time before handing final possession to the new buyers.
If the original owner can pay off their loan, you lose the deal and the house.
Finally, is buying a foreclosed property a good idea?
Still depends on your financial capability, patience, and your 100% certainty. If you have enough to fix all damages either to flip and resell or for rental, then do get an agent who’s ready to answer all your questions.
However, if you don’t have the finances and patience, it is probably best you sit this one out as it can become a terrible pain to your plans