Foreclosures can offer some home buyers big bargains, with the typical discount on a foreclosure about 19 percent, according to National Association of REALTORS® data from May. But buyers should be careful not to be guided by price alone, housing experts warn.
“Distressed properties can have great appeal,” says Wendy Forsythe, executive vice president at Atlantic Pacific Real Estate. “Discounted prices and historically low interest rates make these homes affordable to many families who might otherwise not be able to buy a property. But buyers also need to be selective because not every distressed property is a bargain.”
Home buyers need to be aware of some of the following issues with foreclosures before they buy, according to Atlantic Pacific Real Estate, a real estate brokerage with offices in 22 states:
1. Know the claims on the property. How many lenders have claims against the property? “If a distressed home has been financed with two or more loans then the sales process can be far more complex,” according to an article for RISMedia written by Atlantic Pacific Real Estate.
2. Get financing in order. How does the buyer plan to finance the purchase of the property? “Buyers who use financing must prepare in advance so they can act quickly when a distressed property becomes available as there are often multiple bids on an individual home,” according to Atlantic Pacific Real Estate.
3. Judge the condition. Buyers need to carefully weigh the condition of the property. Some foreclosures require extensive and expensive work, and some buyers may find themselves getting in over their head, if they aren’t careful and don’t have a thorough home inspection done of the property prior.
4. Check for potential delays. For example, is the property already occupied? If so, an eviction may be needed and this could delay the purchase process. Buyers need to be prepared for any potential delays.
Source: “Buying a Distressed Home: What You Need to Know,” RISMedia (July 15, 2012)
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