ExecutiveChronicles.com | Take Control: 6 Key Things to Know Before Buying a Foreclosed Home | Are you looking to buy an affordable home? Buying a foreclosed home is appealing due to the low prices and more traditional builds, but you need to know how to take control of the situation. Buying a foreclosed home isn’t easy.
So how do you get started? Sure you can see these homes online, but they don’t often have pictures like the homes put on sale by private sellers. What’s up with that?
Let’s talk about it. Keep reading for 6 things that you need to know (and do) before you buy your new home.
There Are Fewer Foreclosures Now Than Ever
Getting a foreclosed home has always been popular, but there are fewer available foreclosed homes now than ever before. Why is that?
There are a few things that go into this. The first is that fewer people are falling behind on their mortgages. People who are actually able to afford homes often pay less in mortgage than they would on rent, meaning that they’re able to keep up with payments (and thus keep their homes).
While this is a great thing for the economy, people who are looking to buy a home that needs a bit of extra help for an affordable price suffer as a result.
Another factor is the various housing shortages around the world. As homes get more expensive, fewer people are able to buy. Affordable houses get picked up quickly. This means that all of those foreclosed homes, regardless of their condition, are no longer available for buyers.
There are budget homes available that aren’t put on auction or are the result of bank repossessions, but many people lament the lack of foreclosures.
There Are Several Ways to Buy
When you find a foreclosed home that you’re interested in there are several ways to go about buying it.
The first way is through an auction. This can be an aggressive process, especially in areas with housing shortages.
Potential buyers come to an auction (or the auction is held online depending on the situation). They place bids until one person outbids the others. In some events, the high bid is far more than what the house is actually worth.
This isn’t ideal unless you have a lot of money to spend.
Sometimes with more dilapidated homes (more on that in a moment) the cost never goes up. These homes, however, aren’t for everyone.
The other way to buy one of these homes is through a bank. Once the bank repossesses the home it’s similar to a standard buying process. You hire a real estate agent, place a bid, and get your home.
Buying “As-Is” Can Be Scary
Foreclosures aren’t always in the best condition. Unlike with normal houses, they’re not gussied up and improved before the sale. The owners have no motivation to keep them looking nice.
These homes are usually bought sight-unseen when they go through an auction. This means that you can’t take a look around like you would with a normal sale.
These homes often have water damage, fire damage, or a lot of serious problems with plumbing, structure, or overall condition.
Make sure you’re prepared for a home that isn’t as pretty as one that you’re buying the “normal way” with motivated sellers and agents. Be ready to pay a lot more for renovations and repairs.
Consider Buying Through a Bank
As we mentioned, buying through an auction is stressful. While you’re always competing with other buyers, even with standard home sales, it’s different when people are competing for a home that’s far below the market average.
When you buy through a bank, you skip that stressful process. Buying through a bank is often more expensive, but you may be able to see the house first before making your decision.
Similar to how it would be with private sellers, when you make an offer on the house the bank gets to decide whether or not to accept it. This is far less stressful than trying to outbid other buyers in real-time.
Home Inspections Are a Must
As we mentioned, when you’re buying through an auction these homes are sight-unseen. Even when you’re buying from a bank, it’s likely that the homes aren’t in the best condition.
There are some problems that are obvious. These include the aforementioned structural damage, water damage, and burn damage.
Aside from these, though, there are some problems that the average person won’t catch onto. A good home inspector can help.
They can check on the plumbing system to make sure that nothing is too outdated (though if you suspect serious plumbing problems it’s best to get a plumber out there as well).
They can identify any electrical issues, floor damage, or things in need of repair or replacement.
Most people do a home inspection before a home is bought, but in this situation that isn’t the case. You have to do it afterward.
Change the Locks
It’s common to change the locks after you purchase a home. Installing new locks is easy and it’s a great way to give you some extra peace of mind once you’ve moved in.
Most homes have a master lock. This means that everyone who has interacted with your home since the foreclosure has access to it. They probably don’t have malicious intentions, but you’d rather be safe than sorry.
This also prevents the rare case of the previous owners trying to come back into the home.
Take Control Of Your Home-Buying
Purchasing a foreclosed home isn’t easy. You’ll save money on the home itself, but it may cost you thousands in repairs. For many people, though (especially those who love DIY renovations), this isn’t a problem.
Do your best to take control of the process by checking out bank options or arriving at the auction with plenty of money to spare. Soon you’ll have the home you’ve been waiting for.
For more helpful articles on real estate and more, visit the rest of our site.