Buying a Foreclosed Home: Is it Good or Bad for You?
If someone tells you that you can buy a home for much less money than what you would expect to pay, you would most likely be pretty interested, right? Opportunities like these are what have led to there being such a buzz about foreclosed homes. A number of potential homebuyers are talking about them, but few actually know much about the foreclosure process. Below are a few of AIM HOMES’ pros and cons to buying a foreclosed home.
- Cheaper – The bottom line is what draws people to foreclosed home to begin with is the discounted price, but they are not actually as cheap as you might expect. Years ago, they were often as much as 20 percent below market price. Today, they average about 5 percent below. So, as long as you are not expecting a huge savings, you won’t be disappointed.
- Eager Sellers – If a property is in the pre-foreclosed stage then you have much more bargaining power. Sellers trying to avoid formal foreclosure are generally very eager to sell. Since there is a sense of urgency, they are more likely to handle repairs and even pay the closing costs.
- Risky – If a home is in pre-foreclosure then the owner is still required to provide the history. This does not apply to foreclosed homes. You buy the home “as is” not knowing if there are cracks in the foundation, faulty wiring, or a leaky roof.
- Compromise on Location – Although not a rule, foreclosures tend to be in less desirable areas. As a result, you may need to be flexible. This also means you may have to send your children to a different school district than what you wanted.
- Negotiate with a Wall – “Talking to a wall” is probably an expression you have used at some point. Well, try negotiating without a person. Bids go on a spreadsheet for an asset manager to review and respond to. When you are turned down, you have no way of easily getting the answers you are looking for.
Buying a foreclosed home can appear to be a great idea on the surface, but they do not always offer the exciting opportunities you would expect to receive with one. If a great foreclosed home opportunity falls into your lap then consider yourself lucky; but if you are waiting for the perfect foreclosure home to come along, you could be waiting a really long time.