What's the advantage and disadvantage (risks) to buy a foreclouse house?

Answer 1

In most states, a foreclosure is a complicated procedure that requires certain definite legal steps that must be taken before the foreclosure is legally allowed. After all, it is dispossessing someone of their property, and this must be done precisely according to the law.

If for any reason, there is a defect in the notice required, or service of legal papers is defective, or some other defect in the procedure can be discovered, the foreclosure is invalid.

If someone buys a property at a foreclosure auction or sale, he takes the property, but takes it subject to the rights of the owner; if those rights were violated, the foreclosure is invalid, and the property could still be owned by the original owner. A long and expensive lawsuit to determine title to the property (usually called a "quiet title action", may take months or years to drag out to determine who eventually owns the property.

Answer 2

I am trying to buy a foreclosure for an investment property and I will tell you that the banks are not easy to work with. They do not want to give you anything when you buy the property, and like to take their sweet time with your offer.

One thing to remember when it comes to foreclosures is that banks are in it to make money too, and know what they are doing. You can find deals, and make money on foreclosures, but just because a property is in foreclosure does not mean it is at a discount price. Sometimes the banks list them over market. Find one that has been on the market for awhile and the bank has dropped the price on more than once. This means the bank wants the property off of their books and is willing to dump it cheap.

Banks tend to put their first list price over market and waits to see what happens. If there is no interest in the first month or two the bank will drop their price and continue to drop their price every month or so. The bank does not lose money holding the property for a few months or more, but after about six months or so the bank starts to lose money from carrying the property, so, they want to get rid of the property as quickly as possible. This is when you can buy the property for up to 50% under market, but they are usually the biggest dumps and need a lot of work.

Answer 3

Advantages are, below market price (theoretically), less competition, fast closing, possibility for good profit margin, &c. But since the house is being "dumped", there is much less incentive for it to be in good shape. It may have undisclosed problems, neglected upkeep, human or animal stains or odors, hidden damage, so be prepared to do at least a tiny amount of renovation and cleaning up in any case. Also, be sure that the foreclosure is 100% legit, as it is probably not worth a drawn out legal fight, if the ownership is at all in question.

Answer 4

Advantages: You may be able to get it cheaper than market price. If it's a HUD or VA foreclosure, you may get money in an escrow account to fix certain items.

Disadvantages: Because the owner has little incentive to take care of the place once foreclosure starts, it may need a lot of work. Neighbors may see you as the person who kicked their friend out of his home. The former owner may not be willing to go quietly and bother you at your new home.

Answer 5

biggest risks are potential problems from not having an inspection, liens that did not show up on the initial title report (it does happen, and you'll probably have to pay them)
the advantage is that you can get a smoking deal that you flip in a few months and make a 20% profit or better

Answer 6

it would be good if your looking for a house to flip. which means you should be willing to put in a lot of work if you want a good profit.