I am almost certain that the same person keeps calling me and changing their name to disguise themself. And everytime they call they want to know about foreclosures. They want the awesome house, in a awesome neighborhood, and they want it for half of what it is listed for, and it better darn well be in great condition too! Its bank owned they say, and the bank doesn't want to hold property, they want to liquidate so they don't have to manage it. I try to explain that in our market in South Dakota we have a considerably lower amont of foreclosures then other markets. http://realestate.msn.com/article.aspx?cp-documentid=13107814
But this person wants to buy a foreclosure even after the facts are presented. But did you know Mr./Mrs. Buyer that there are some definate drawbacks to buying a foreclosure?Here are some things to keep in mind.
1. Buy a foreclosure and you may have to evict the occupants...this does not happen in all situations but can get really nasty if it does. Would you have the heart to throw a family with kids out on their keister?
2. Everyone has it in their head that they will get an awesome buy if they buy a foreclosure, but this is not always true. A fire sale always brings out bidders and if you have alot of bidders you have alot of competition. More competition equals higher prices.
3. Foreclosure auctions take this competition to the next level and put some urgency to it. Who hasn't been to an auction and gotten a little out of control with their bidding. The next thing you know you have bought a house for over its market value.
4. With sometimes no time to do research you are buying a house as is. What this means is you could be buying a house with outstanding taxes due or no home inspection. And if you're the winning bidder, it's yours -- there's no going back.
5. Profits from flipping can be way slimmer then estimated. If you fix a foreclosure up you need to realize the road to foreclosure has been longer then the foreclosure proceedings. Homeowners that face foreclosure have been short of money generally for some time and do not do routine maintenance in many cases. The cost to reverse this and then the cost of selling the property and holding it until sale can make flipping a foreclosure not worth the trouble.
6. Financing a foreclosure can get a little complicated. Down payments are usually due the day of sale with financing due generally within 24hours. Traditional lenders take considerably longer to do a loan then you have with a foreclosure so they are generally not an option.
7. If you didn't do your homework you could even be paying off a second mortgage when there is still a first mortgage still out on the property. It is very important that you do a title search on a foreclosure to ensure that there are no liens, mortgages or clouds on the title that would affect its transferability.
8. Due to a limited time frame it is difficult to get estimates on repairs needed to flip the foreclosure. Time is also tight to get inspections to determine condition of unknown defects as well.
9. Foreclosure properties can be stripped of appliances, light fixtures, cabinets, flooring....if it can be pryed up or disconnected it is fair game.
10. Vacant houses are more likely to have issues with mold, mildew, broken pipes, water damage, and roof leakage among other things.....and remember you are buying AS IS.
So while you may be able to buy a home a little bit cheaper you also may be buying a nightmare and lose your shirt in the process. So is it worth it to you....considering that the foreclosures bring down property values all around them. Bring down values on homes say that are up for sale due to relocation. Bring down values on homes that have been lovingly cared for and occupied. I guess my point is you need to evaluate if the saving is worth it considering the risks involved. Also I want to emphasize that if you do buy a foreclosure do it through a Realtor who is exerienced with the process.