When you're in the market to buy a home but are working with a limited budget, a foreclosed home can seem like the ideal option. It's a chance to buy more house than you'd ordinarily be able to afford, so whether you're looking to upgrade your own living situation, purchase a house to flip for a profit, or buy a home to rent out for extra income, a foreclosure could be a great opportunity for you. However, you still shouldn't rush into the purchase without carefully considering it. Take a look at some mistakes that you need to make sure to avoid when buying a foreclosure.
Not Looking at the Neighborhood
Ideally, when you buy a foreclosed home, you'll end up with a home that you'll be able to sell sooner or later for more than what you bought it for. However, not all neighborhoods rebound. If the house you're considering is located in a neighborhood that's declining, you may not be able to count on making a profit on your home at any time in the foreseeable future.
Take a good look at the neighborhood before you commit to the home. If you're seeing a lot of other foreclosed and for sale signs and other indicators of a declining neighborhood, like abandoned houses and closed businesses, then your foreclosure may not be as good of an investment as it first appeared to be.
Not Knowing What You're Getting Into
You may be in a hurry to jump on a good deal, but that doesn't mean that you should skip the parts of the process meant to protect you. Don't assume that the bank knows about or will fill you in on any problems with the home the way a homeowner would – after all, the lender has never actually lived in the home. Don't skip the inspection, and definitely don't buy a home you haven't seen.
Also, it's important to understand what you may be dealing with when you buy a home "as-is." When you buy from a homeowner, you may be able to get them to make certain repairs before you take possession of the house, but a lender is less likely to do this – they'll sell the home as-is instead. That could mean only minor repairs, but in the case of a foreclosure, departing homeowners have been known to do things like rip out wiring and fixtures. Unless you have some handyman skills or don't mind footing the bill for possibly extensive repairs, you may want to avoid as-is foreclosures.
Not Using an Agent Who Knows the Ropes
Even if you've bought a home before, you still need the advice of a real estate agent when buying a foreclosure – and it should be an agent who has plenty of experience with foreclosure sales.
Buying a foreclosure is a different kind of home-buying experience. There are several stages of foreclosure – is the home you're looking at in pre-foreclosure? Is it a short-sale? Or is the foreclosure complete? The bank will probably take longer to approve you offer than a homeowner would, and the process may be a bit different. Having an experienced agent working for you can help you better understand the process.
With an experienced agent, the right information, and a little patience and due diligence, shopping for a foreclosed home could be a great experience, and it could allow you to make a good investment in your future. Talk to a realtor like those at Sun Royal Realty for more information.