Buying a foreclosed home has its benefits as well as its downsides. For one, you’re receiving a discount on an actual home that you can call yours. On the other hand, your house could be riddled with unknown damages that may be beyond repair or at a high cost to fix. Here are some other pros and cons that will help decide if a foreclosed home is right for you.
What exactly is a Foreclosure?
First off, what is a foreclosure? A foreclosure is where the lender retrieves the unpaid balance on a loan from the homeowner. Because of the homeowner’s inability to afford the interest and principal payments on the mortgage, the bank is forced to take action by seizing the home from them. These homes are then placed on the market for the public to purchase.
One of the main attractive features of a foreclosed home is the discounted price that it’s listed at. Furthermore, they also have the ability to be marked down even lower in certain areas, making them extremely enticing.
Another pro is the house’s value. The possibility of a general rise in value makes owning a foreclosed home ideal for investment purposes. House flippers tend to look at foreclosures for their upside in value.
The unpredictability of hidden damages and costs associated to the house can turn home buyers away. Homes that have not been sold and have been left sitting on the market can accumulate wear and tear throughout the months of neglect – things like wood rot, fragile water pipes, and mold.
There is always going to be a demand on foreclosures because of their ability to appreciate in value. Investors are always seeking homes that could – once fixed up – be resold for triple the initial investment. You’re not only competing with other home buyers but also with investors. This can turn into a massive bidding war which could nullify the whole reason why you wanted to buy it in the first place.