Just want to ask what are the risk in buying foreclosure home and what are the advavtages?

Answer 1

There are a ton on both sides of the coin. The advantages versus disadvantages will be somewhat different based on whether you are planning on living in it, renting it, or rehabbing it and selling for a profit.

Whatever your plan, make sure that you have a real estate agent who is versed in the forclosure market as well as contractors/inspectors who have dealt with this type of property. If you plan on completing the rehab yourself, make sure of the permits and so forth that you may need.

Utilities will most likely not be turned on for inspections, although occasionally I have seen this happen. But be sure to budget for repairs on the mechanical systems of the house. If they end up not being needed, you will just be ahead of the game.

Remember in rehabbing, don't overimprove the home for the neighborhood, market conditions etc. or you will have trouble selling it down the road, at least for the amount you will end up putting into it.

Make sure that you purchase title insurance for the amount that you will have in the home, not just the purchase price. Make sure you have a reputable title company researching the title on the house, you don't want any unfound leins causing problems down the road either.

Check out market conditions for reselling and be on the low end of after market value so that you can sell it quickly and not pay months carrying costs if that is the ultimate plan. The market, at least in Ohio is becoming more of a rental area versus reselling, so check that out in your area and decide if you want to be a landlord or not.

Answer 2

Advantage.....you're basically paying what still owed on the house. Foreclosures can be very cheap because a poor sap had a bad run of luck.

Disadvantage...you're contract is legal and you are buying as is.

The bank is not going to try and make the house look attractive as most realtors do. This could have been a drug house, or it could have been a normal family home. You never know.

You may get a gem, you may get a diamond in the rough. Either way, foreclosures are a great way to get started. Good luck!

Answer 3

There are risks when buying a foreclosed home. First, the property might not be in the best condition. So if your planning to resell this for a profit, you might want to consider how much you have to invest in the actual house as well as in the amount it will take to fix it up. You want to make money off this investment and try not spend to much in order to get the job done. The best way to go about it is to find the perfect foreclosure and do as much research on it as possible. I bought a home off of foreclosure.com and was able to get all the information about the property as well as the neighborhood and what the actual worth of it is.
As for the advantages of buying a foreclosed home, there are lots. If you are in the market to buy a cheap home to live and fix up to your liking, your in luck because there are tons of foreclosures popping up and buying a home to get rid of a high mortgage payment is ideal these days. If your buying to resale, you could also make money off this kind of investment. No matter what you end up doing, I would first do tons of research to make sure you make a smart purchase.

Answer 4

Lots of risk.
You may need cash to buy as many mortgage companies dont loan on them if damaged.
Also you can sink lots of money in repairs and it could be harder to sell when you go to sell if it was all cash deal (no creative fianancing).
Forclosure properties take time and money (lots of it) Once in awhile you can find one needing little but they are rare as most agents pick them up before the word gets out.

You have to weight the time and money you need (man hours) and see if it is feesible (will you make money on it)

The only advantages is if you find a sleeper, a property that only needs minor cosmetics that you can easily get into and that is in a very desirable neighborhood, than can be sold for a profit. If your area is in the RE boom you can turn most homes. But remember, Real Estate is now on the down turn. Homes are taking longer to sell, interest rates are climbing and many our sitting on the market 120 days (depends on area).

Good Luck

Answer 5

The risk is mostly that you usually buy it as is. If something is wrong with it-it is buyer beware. Sometimes they have been abused by the previous owners. You just have to use your common sense and have professionals check it out for you. If everything checks out you can usually get a better deal on the price then the average market.