We can summarize foreclosures in three distinct groups...Owner Occupied, Non-Owner Occupied and Bank Owned.
This may greatly affect the type of loan you can qualify for and a couple of other key issues. These home are usually "AS IS" which means if you do not have some extra cash you could be buying a "Money Pit" where your extra money is soon gone!
The reason your hidden costs for repairs can sky rocket is the owner and lender has not or will not do anything more to the property once foreclosure status has been started. So routine maintenance soon becomes required maintenance. These repairs can be wide ranging or very simple...but only an inspection with a qualified inspector will give you the real scoop on what needs to be done.
Hidden mold from a leak or moisture can be something difficult to find the source but greatly impact your families health. Many of these homes do not have any electricity or water available to check the plumbing and electrical. This can lead to unknown surprises like broken or missing pipes in some cases. One home I was told the vacating family used a chain saw to the walls and took all the wiring another took all the copper pipes for scrap value. These may be exceptional cases but happen more often than you think.
So some of these so called "good deals" can have dollars flying out the of your wallet faster than you can make them. You know you will have to paint, carpet and even replace fixtures and appliances in most cases.
Hot water heaters, furnaces and air conditioning units are not cheap but may need repair or replacement. Once thing you can count on....they have not been maintained even with basic inspections.
FHA/HUD do not do any repairs, they may cover a leaky roof so no further damage occurs...but by that point it is already a major issue. So FHA/HUD looks at the home "AS IS" only and discounts homes around 40% of value.
Fannie Mae looks at home from two viewpoints...one "AS IS" and the other "As Repaired" for appraisal value. Fannie Mae decides if they can market the home and minimize their loss or do a quick repair and sell the home or market the home "AS IS" if the repair is to costly and not worth the return they can get when the home sells.
Two very different approaches.
Finally there is the bank owned properties. The bank s may try to sell properties for what is owed or dump it. This depending on costs, repairs and the market.
Getting financed is not always as easy on homes like this if you have bruised credit. So get with a lender and get your credit issues resolved before you begin your home search.
So is foreclosed properties the right choice for you? If you go into the purchase of a foreclosed property with your eyes wide open and a budget in mind for the repairs it could be just what you are looking for in a bargain home. If you are an investor this may be the opportunity to expand your portfolio of properties.
This is a quick overview to help you evaluate if Foreclosed properties are the right choice for you to pursue.
If you live in Michigan and would like a free list of HUD homes available we are a HUD Authorized Broker. Call: Toll Free 877-667-4699 Email: firstname.lastname@example.org or go to our Website: www.FlexItRealty.com