The Truth About Buying A Foreclosed Home
Dec 5, 2007
Author: Family Realty LLC

The Truth About Buying A Foreclosed Home

Once the realm of only seasoned real estate investors, the interest in purchasing foreclosed properties has fanned out to a growing number of ordinary home buyers. As the sub prime lending fiasco continues to push homes into foreclosure, many prospective home buyers are eyeing these properties as a way to get a lot of house for little money.

There seems to be a big misunderstanding by the public, however, about the value of homes being foreclosed on. People tend to think a foreclosed home presents a bargain, especially those who are looking for real estate investment property. They think that they can buy a foreclosure cheap, do a little fixing up, and sell it for a hefty profit, expecting to reap instant equity. Well, it doesn’t work out that way very often.

Out here in the trenches of real estate, we have seen an increase in foreclosed homes being dumped on the market and the number of people looking for such homes who are expecting to purchase one for pennies on the dollar. We have even seen clients who specifically wanted to view only foreclosures, because they wanted a home they could buy cheaply. As it turns out, most end up buying a conventional home once they see a few foreclosures and begin to understand what they are up against.

Banks are not stupid. They know the value of real property and are not about to give it away. It’s an asset to them, not a liability. When they have to sell a home that they’ve repossessed, they offer it at market value, not necessarily for what is owed on the house. It is true that many foreclosures are priced lower than seemingly comparable homes in a given area, but they are almost always in poor condition, sometimes requiring extensive repairs. And that is where the danger comes in. Foreclosed properties are sold “as is”, meaning that when you buy the house, you have to take it in its present condition, the way you see it.

If you do your homework, however, and are smart about the whole thing, there are bargains to be found from time to time. If you’re determined to buy a foreclosure, work with a competent Realtor® and know the real estate market, the condition of the property and the cost to make repairs. No matter what your objectives for buying a foreclosure are, get the facts. That bargain property could turn into your worst nightmare.