For prospective home buyers yearning for an exceptional deal on a house, purchasing a foreclosed home can be a good option. A foreclosure occurs when a homeowner fails to make payments on their mortgage and must transfer ownership of the home to the lender. Thereafter, the lender will attempt to sell the foreclosed home in an effort to recover some of its costs. Think you might be interested in a foreclosed home? Here’s how a foreclosure sale works:
During the housing crisis of 2008, homes were getting foreclosed left and right. Today, foreclosure only happens to 1 in 13,000 homes, according to RealtyTrac. However, if you look at states like Maryland and New Jersey, 1 in 550 homes end up in foreclosure.
While foreclosure isn’t something you’d ever wish upon a homeowner, it does allow for very appealing prices on homes. Foreclosed homes have an asking price that is typically about 15% lower than the home’s actual value. When you buy a foreclosed home, you can usually get a lender to sell it for even less than this asking price as well. Bankers are focused on recouping their money, so they will want to sell as fast as they can. The asking price is usually calculated by adding the remaining mortgage note to the interest, lawyer fees, and penalties.
Purchasing a foreclosed home for a bargain price doesn’t come without its risks, unfortunately. First and foremost, a foreclosed home is usually sold to the buyer as is – meaning that the lender will not be responsible for fixing any issues that may be found within the home. When considering the fact that the homeowner probably wasn’t in the best financial situation, the home could have many problems.
Furthermore, the lender and the old homeowner are not required to tell the home buyer about every single issue in the home. Therefore, unlike a regular home sale, you may find flaws that you were never told about prior to moving in.
So, while you may initially purchase a foreclosed home for an excellent price, you may end up having to spend a substantial amount on renovations – which could prevent you from actually saving money.
The best way to avoid any of these risks associated with the purchase of a foreclosed home is to be cautious. Here are few preliminary steps you should take:
When you select us, you’ll work with a law firm and title agency offering cutting-edge tools to streamline your closing so it takes place on time. If you’re a home buyer, lender or real estate agent who would like more information, please contact us today!