6 Red Flags to Look Out for When Buying Foreclosed Properties

Real Estate Agent with Micheal John

Foreclosures for sale offer many homebuyers the chance to buy their homes for lower prices. Buyers also get to move into upscale communities through the multitude of foreclosed properties offered in these areas.

But behind the economic prices are possible red flags that may leave you with regrets later on. Read about these six red flags that you can avoid when buying foreclosed properties.

“As Is” and “Cash Only”

While foreclosed properties are often sold “as is,” it is still best to thoroughly check if the “as is” state of the property is manageable or irreversible. You wouldn’t want to buy a house and pay off all the damages along with your mortgage and other fees.

If a property is sold to you on a “cash only” basis, be thorough with your inspection of the property. This signifies that the previous owner might not have enough funds to cover damage repairs and housing fees, which will inevitably become your responsibility.

Unsettled Payments

Research for any unsettled payments such as mortgage fees and liens. Your foreclosed property can become a subject of lawsuits if there are unresolved liens that the previous owners have with banks and their creditors. You can purchase a title insurance policy to protect you from potential losses from the defects and overdue payments of the foreclosure.

Illegal Renovations

Before you get excited about the renovations done by the previous homeowners, inspect if these renovations are covered by the necessary permits. Just like overdue payments, you don’t want to run into future lawsuits caused by these unauthorized renovations.


You might have encountered damages and unsightly marks in a foreclosed house while touring for properties. These could be caused by displeased previous owners who poured out their frustrations about not paying their mortgage payments by sabotaging the house. Previous owners retaliate against the banks that foreclosed their homes by vandalizing the property. This renders the property “unsellable.”

While most banks cover basic repairs for their ready-to-own units, damages such as missing cabinet covers, doorknobs, countertops, and appliances are not covered by the bank. If you see the property has been vandalized, move to another.

Multiple Damages

Thoroughly inspect for other damages obtained during the previous owners’ stay. Some deteriorations might be due to natural causes, such as water pooled due to heavy rains, leaking, and termites or wasps building their homes within the walls and ceilings.

If the damages are irreparable, then it’s wise to look for another foreclosed property.

Shady History of the Property

Hollywood has shown films of remodeled foreclosed houses that were supposed to be a haven for families but turned out to be a den of horrors and nightmares. While movies may exaggerate actual events, it doesn’t hurt to research the property’s history to know more about what you are about to buy.

Learn about the area’s disclosure laws to know the occupancy history of the home. You can also confirm any haunted tales from neighbors and town officials. You don’t want your future home to be occupied by supposed spirits or negative energy before you move in.

Buying a foreclosed property has a lot of risks. While their affordability is attractive, be sure to research the property’s history, look for issues that need to be addressed, and be wary of these six red flags. Like what elders say, it is better to be safe than sorry.




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