When you’re in the market for a new home, a traditional purchase may not always be the best option. Foreclosed home sales often present unique opportunities for home buyers and flippers, but they may also have some risks.
If you’re considering a non-traditional purchase, we can help you familiarize yourself with the pros and cons of buying a foreclosed home so you can make the best decision for your future.
When Are Foreclosed Homes Sold?
Foreclosed homes are often sold in the following stages: pre-foreclosure, auction, or post-foreclosure. Each stage alters the buying process and comes with distinct benefits and challenges.
Pre-foreclosure is the first step in the foreclosure process. This stage occurs when the homeowner misses multiple mortgage payments, and the lender issues a notice of default. During this stage, the homeowner has options to avoid foreclosure, including selling the home at a lower price to make a short sale.
If the homeowner cannot avoid foreclosure, the lender is allowed to sell the home in an auction to recoup what is owed. This stage enables potential buyers to purchase a home at a lower price while avoiding long negotiation periods.
When a home does not sell at auction, it becomes a bank-owned property and can be sold in the general real estate market. This stage allows potential buyers to view the home and obtain routine inspections before making a purchase.
What Are the Pros and Cons of Buying a Foreclosed Home?
Like traditional home sales, buying a foreclosed property has pros and cons. Each foreclosed home will be different, and you will likely encounter an array of situations. However, with the proper preparation, you will know what to expect and how to respond.
- Lower purchase price | The most significant advantage of buying a foreclosed home is the price. Due to the nature of foreclosure, homes in this stage sell for below market averages.
- Bargaining power | Lenders are often willing to negotiate and make concessions on closing costs, due diligence, price, and escrow.
- High returns | When a foreclosed property is purchased at a low price and repairs are made on an effective budget, the potential for high-profit margins is greater.
- All cash sales | Many foreclosed properties are purchased with all cash. Often, auctions only accept cash offers. Alternatively, if you buy a home at the pre- or post-foreclosure stages, it may be challenging to secure a mortgage, depending on the property’s condition.
- Property condition | All foreclosed homes are sold in “as-is” condition, meaning that the seller will not make any upgrades or repairs to the house. Therefore, if the property needs any major or minor improvements, the buyer must address them after the sale.
- Additional costs | In addition to repair costs, if the foreclosed property has title issues, the buyer will be responsible for paying outstanding property taxes, superior liens, and/or transfer taxes. The best safety measure when purchasing a foreclosed home is to buy title insurance to prevent financial loss.
The good news about the cons of buying a foreclosed home is that they are often circumstantial. For buyers that have cash on hand, making cash-only offers will not be an issue. Similarly, having access to sufficient funds makes paying additional fees or making necessary repairs more straightforward.
How To Find Foreclosure Homes for Sale in West Michigan?
Now that you know the major pros and cons of buying a foreclosed home, it’s time to begin your search! While countless real estate sites are used for browsing traditional home sales, you’ll need to search in several places to find foreclosed properties.
These are the best sites to search for forecloses:
- Country records – Local county records are often the best place to look for foreclosures. These sites not only list properties in foreclosure, but also publish the notice of sale for upcoming auctions so you know when and where a home will be auctioned.
- The MLS – Pre-foreclosures and bank-owned homes can be found on the MLS, and real estate agents can view how much money is owed on a property.
- Loan servicing company sites – Many lenders feature searchable lists of bank-owned homes on their websites.
- Governmental agency sites – Federal agencies like HUD, Freddie Mac, and Fannie Mae often take ownership of properties from defaulted FHA loans and publish searchable listings on their websites.
Need To Move Out of Your Home Quickly? Renewed Homes Would Like To Help!
If your home is facing foreclosure, you do not have to navigate the process alone. Our team of experts can help you understand the details while presenting you with the best alternatives. Renewed Homes specializes in creating valuable solutions that avoid foreclosure, save your credit, and help you move out quickly.
Want to learn more? Contact our team today and start preparing for a better financial future.