Pros and cons of buying foreclosed homes?

Question

I'm a first time home buyer and have credit issues and I want to know what are the pros and cons of buying a foreclosed home. I've seen a lot of them that I love and the prices I love them more, but I'm a little unsure!

Answer 1

Ok, I can tell you first had because I just went through it. I also have credit issues. The first thing you need to do is to get pre-approved. Not pre-qualified, a lot of the banks that own these homes won't accept offers from people who don't have the pre-approval. Also, when looking you may see that they want earnest money. In my case many of them wanted 1000 or more in earnest money.

Make sure when you work with the broker you ask for a sellers consession. We were able to get the bank to agree to a 6% seller consession which means that the seller (bank) has to pay the buyer (me) 6% of the total sales price to cover the cost of closing fees and other fees associated with purchasing the home.

The worst thing for me was waiting for the buyer to answer on our offer. It took 2 weeks beyond the agreed upon date but if you really want it you will have to wait it out.

Even if it is a forclosure you have the option to have an inspection done - DO IT. It is the best $300 bucks you will spend. The inspector will be able to tell you what is wrong with the house and help you set up a list of priority repairs. Most of the forclosed homes are sold as is and you will have no recourse if you sighn the final sales contract. You can write in "pending inspection" in the offer to the buyer. This is a great out if you find a major issue that you can't afford.

Good Luck and I hope this information helped.

Answer 2

Pros: Getting the home well under market value.
Allowing those with little money to be a property owner.
Cons: Can not view inside of home.
Can be hard to get financing but not impossible.

Here's what you should do beforehand to determine if you are ready or willing to get involved in the foreclosure auctions in your area.
1. Familiarize yourself with the laws of the county regarding foreclosure.
2. Find a reliable source of information for your foreclosure listings. Try a local foreclosure listing service, legal notices, or the county clerk. Stay away from nationwide sites. I use propertyshark.com which cover a number of metropolitan areas in the country but are perfectly organized and provide tools to help you research.
3. Attend some auctions first to make sure you are familiar with the process and what to expect.

People can find a lot of success in foreclosures. Because of the deal you can get in the manner there are increased risks and problems you can face. This is why I always suggest becoming an expert in foreclosures in your area before even thinking about bidding. That way you feel confident that the decision you make will be the right one. I have heard horror stories from those who didn't do their research and in the end lost a lot of money.

Good luck finding your new home. You can do it!!!!!

Answer 3

There are two types of foreclosed property, bank foreclosed and government foreclosed. I am not that familiar with bank foreclosures. Government foreclosed property, because of failure to pay property taxes, are typically a closed bid auction, with the highest bidder buying the property. However, you would need to have financing in place prior to the auction and you buy it "as is".

Answer 4

only know one buyer of a forclosed home and this was their experience-----Pro:cheap versus the rest of the market
Con: all and more of the "saved" money spent fixing up the crap the former deadbeat owners did to the house.

Answer 5

Pro is of course, the price.

The BIG con: they are usually in horrible shape and the process to purchase them can cause you to pull your hair out.

Answer 6

LORI D I can't vote yet but yours is the BEST ANSWER! Ditto on the inspection, too. The gov't doesn't give "do overs"!
I have bought several and your experience is identical to all of mine.