Buying a home in foreclosure: advantages and disadvantages

So you’ve finally decided to buy your dream home, but you’re on a small budget. You can still buy your dream home by buying a home in foreclosure. Foreclosure is the legal process of recovering the loan balance from a borrower who has stopped making payments.

How to buy a home in foreclosure?

If you have decided to buy a particular foreclosed property, talk to the owner and negotiate a deal with him. You can buy the property for a good price, as the property owner will be looking to pay off the loan amount.

You can also buy a property in foreclosure from the loan agency that has taken over the property after a particular grace period. Banks auction foreclosed properties in quick time.

Do your homework before buying a property

Like most major purchases, you should do a thorough investigation of the property. Understand how the entire foreclosure process works, and also attend some foreclosure auctions to familiarize yourself with the process. Learn about the market value of the property and also about the history of the property.

Advantage

– Foreclosed homes come at a great discount and you can buy a foreclosed home for around 25% less than market value.

– With numerous projects looming, prices for homes in foreclosure have dropped even further.

– As the house is already built, you can move in immediately.

– You can buy these homes with confidence without worrying about the legality of any of the documents since they would have been verified by the bank.

– Most of the homes executed are quality homes in good residential areas.

– When buying a home from a government-recognized financial institution or bank, you can trust the seller.

– You can complete the entire transaction in less than two months.

Disadvantages

– You do not get any collateral on repossessed homes.

– Since you are buying the property as is, there may be a lot of repairs and modifications required. The previous owner may not have had money to pay his loan payments on time, so he may not have had money to pay for repairs either.

– The bank will also not disclose any history of the property or the condition of the house.

– The previous owner may have had other debts, such as property taxes or maintenance fees, that you may have to pay if you want to buy the repossessed home.

– Calculating the value of a home in foreclosure can be a difficult task.

– You may also have to pay utility bills like electric bills and water bills.

– Banks may not offer you a loan for a home that has been foreclosed, as there may be legal problems on the property.

– You may have to pay the purchase price of the property in cash only. This can be a problem if you cannot get a loan from a bank.