So, You Want To Buy A Foreclosed House ? The Pros and Cons of THAT Proposition…
Let's cut to the chase. In this market (heck, in any market) people want the best deal possible when looking for a house to buy.
This is why foreclosed properties are so popular among buyers . Oftentimes, foreclosed houses represent the opportunity to purchase a really nice house in a really nice area...a house that would, under normal circumstances, be out of their reach.
Now, keep in mind that these houses have been foreclosed on – why do you think that is so? The former owners were not able to keep up with their mortgage payments, for a variety of reasons. If they were unable to afford their mortgage payments, what do you think happened to regular maintenance and upkeep of the property? Mowing the lawn? Cleaning the gutters? Updating kitchens and bathrooms? You get the idea.
Now the bank owns the house. Does the bank have any idea how old the roof is? Does the bank know when the last time the furnace was cleaned, or how old the furnace is? Can the bank tell you, the potential new owner, if there is a history of physical problems with the house, such as water in the basement? Mold forming conditions? Had there been infestations of any type? Again, you get the point.
This is why most foreclosed houses , when they are listed, contain the designation “sold as-is”. In a worst case scenario, you will have to then have funds available to make the necessary repairs – replacing plumbing and wiring, updating electrical systems and windows, etc. A house in that condition would not qualify for conventional financing, but would require the use of either cash or a rehab loan, such as a 203K FHA. In the best case scenario, you may only have to deal with putting a new coat of paint on the inside walls and cleaning the inside.
Then there is the issue of the bank responding to your offer in a timely manner. The stories vary wildly from location to location, and from bank to bank, so I will not generalize and state that all banks take a long time to respond to offers on foreclosed properties. However, do be prepared to wait for an answer if you do not hear back from the bank with an acceptance of your offer through your agent.
There are other drawbacks to buying a foreclosed house – Elizabeth Weintraub wrote an excellent article spelling out the drawbacks of buying foreclosures .
Before committing yourself to seeking foreclosed houses as your best bet to buy a house , make sure that you understand all of the potential pitfalls that are associated with buying foreclosed houses . If, in the final analysis, you are able to ride that road, then go for it!
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Courtesy of William James Walton, Sr ., Realtor, Century21 Access America
Serving northern New Haven and southeastern Litchfield Counties (Waterbury, Wolcott, Prospect, Naugatuck, Middlebury, Southbury, Watertown and Plymouth)
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