Sandbridge Real Estate Net

Pros and Cons of Buying a Foreclosed Home

Foreclosed homes used to be a scary site. Nowadays, Banks renovate their listings before selling in hopes of selling to a home buyer not investors. Banks want to minimize their loss not just sell a foreclosed home as quick as possible. Just because a home is foreclosed doesn’t mean you shouldn’t take a look. Just be sure to look at the pros and cons and know what you are getting in to. Check out a few pro’s and con’s below!

PRO: They are still cheaper

Today, bank foreclosed homes are typically about five percent below a comparable house in the same location that is not a foreclosure. In previous markets, they were often in horrible condition and about 15 to 20 percent below market.

While many new buyers set out in search of the deal that comes with these sales, many REOs should be left to more experienced home buyers.

CON: Foreclosed homes can be very risky

Even though they are priced higher today, REOs still come with baggage. Many banks will invest money to make the listings look nice and get the prices up. In return, they are less flexible on price and less eager to sell in general.

Behind the scenes, these are still risky sales. You don’t know about the history, and there are no disclosures about leaky roofs, mold or crime. And you are forced to buy the home “as is,” without any recourse if things go wrong.

Investors were once fine with this risk, but they are less interested today because the “deals” are gone.

CON: Many foreclosed homes are not in prime locations

Many of today’s foreclosed homes are in less desirable parts of towns or school districts. If you see an REO and the price looks good, remember that it may not be the foreclosure that makes it such a great bargain. It could be location, and you don’t want to get stuck unloading a home in a bad location in a few years. Foreclosed homes in good locations will sell quickly.

CON: Banks aren’t people

Consider that you are negotiating with a spreadsheet. Unlike a typical seller who may care about your situation, your personal background or market history, banks don’t. Your offer is likely submitted electronically and placed into a cell on a spreadsheet for an asset manager to consider. If the numbers don’t work, expect a big rejection. Never get your hopes up.

Buyers today can’t assume that a bank-foreclosed home is a good deal. While you can still find a needle in the haystack, they are fewer and farther between.

Banks want top dollar out of their foreclosure inventory. They are sellers just like anyone else. They watch the market and read the headlines. Foreclosed homes will be priced slightly lower than the market, but they are still as-is, take it or leave it with some risk associated. Do your homework and work with a good local real estate agent before signing on the dotted line.

http://www.zillow.com/blog/pros-cons-foreclosed-home-180916/

This entry was posted on Wednesday, August 12th, 2015 at 9:00 am and is filed under Buyers. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Comments are closed.