The economic meltdown caused by the Great Recession has resulted in a huge influx of foreclosed homes. Buying a foreclosed home offers many advantages and potential pitfalls for the buyer. The purchase of a foreclosed property allows a buyer to find a home that may otherwise be unaffordable.
1. Get Pre-approved For A Loan:
Any potential homeowner needs to obtain pre-approval for a loan before they begin their search for foreclosed properties. This allows a buyer to know exactly how much they can afford prior to beginning their home search. Buyers that do not obtain a loan until they have found a home will often discover the home is outside of their financial reach.
2. Find A Qualified Real Estate Agent:
Anyone considering the purchase of a foreclosed home will need to use a real estate agent experienced in selling these types of homes. A qualified real estate agent will be able to steer a buyer to a home with good potential that is priced right.
3. Research The Neighborhood:
Researching the neighborhood will allow the potential buyer to know how much their home will be worth after renovation. If the entire area is flooded with foreclosures, recouping the money spent on upgrades may take many years. A buyer needs to determine how long they are willing to wait for a return on their investment. For example, real estate in Denver tends to retain its value very well.
4. What Type of Foreclosure Is The House:
A buyer needs to know if the home is a short sale or bank owned. A short sale home is one that the current owners are trying to avoid foreclosure on by selling it for less than they owe. A bank owned home has already been foreclosed. Buyers need to be aware that purchasing a short sale or foreclosed home takes longer, due to the many agencies involved in the process. Some foreclosed homes take months for a purchase to be approved by the bank.
5. Have The Property Inspected:
Anyone who is considering buying a foreclosed property needs to have a professional inspection done prior to the purchase. An inspector will find and point out potential costly repairs. This will offer the buyer the chance to determine if the home is too much work, too costly to repair, or if it is something that is easily tackled.
6. Do A Title Search:
Many foreclosed upon homes will have liens or taxes attached to them. The buyer of a foreclosed home with these issues will be liable for any lien or taxes due on the property. A title search will locate any attachments on the property. This allows the buyer to decide if the home is still financially viable to them.
7. Check For Neglected Maintenance Issues:
Thoroughly check the home for neglected maintenance or poor maintenance fixes. A home that was maintenance was ignored or poorly done may be a sign that deeper issues are unseen. A potential buyer should check the heater and air conditioning system for its age and condition. Repairs or replacement of the heating and cooling system will cost a substantial amount of money. This will reduce funds designated for renovations.