A foreclosure is a unique type of property opportunity and needs to be tackled with a lot of research. For a first-time home buyer there are benefits and negatives to buying a foreclosure, and a first-time home buyer should be very aware of the potential pitfalls. Foreclosures represent an excellent chance to get more home for the money, but there are many mistakes that can prove very costly.
Foreclosures have many benefits that traditional housing purchases don’t. Since foreclosures are typically owned either by the bank or the government, the seller wants to close the deal as soon as possible. This means there are rarely negotiations, and the first bid usually wins. Because the banks and the government both have a huge inventory of homes that they need to get rid of, the homes are usually priced very reasonably. This means that the first-time home buyer also doesn’t have to worry about overpaying.
Buying a foreclosure from a bank or from the government is a slightly different scenario. Banks tend to move faster on the sales than the government does, but the government homes tend to be better maintained.
Many banks could not keep up with the maintenance on all of their foreclosures, which is why they need to move the inventory quickly. The government, however, had initiatives to remodel and repair many of the homes that fell into their inventory, which means the homes may be in better condition.
One of the major issues with buying a foreclosure is that there may be hidden damages in the property. Foreclosed properties have often been poorly treated. Sometimes the previous owners take their frustrations out on the property before they leave, and sometimes the banks simply can’t maintain the buildings. A common problem in foreclosed properties in colder areas is burst pipes because the utilities were not paid. These are issues a first-time home buyer might either not notice, or not know how expensive they are to fix.
A very thorough home inspection is always necessary when buying a foreclosure, but it may not catch everything. Even the most thorough of home inspectors have certain issues that they simply would not be able to catch without going into the home’s walls or pulling up boards. Because of this, anyone buying a foreclosed property is right to be cautious. There are also hidden expenses, such as replacing appliances, since the appliances in foreclosed properties are usually older.
Buying a foreclosed property can be a great deal for a prudent investor, but all of the appropriate steps need to be taken to make sure the home won’t cost more than it’s worth.