If you have done any research on buying a home over the past couple years, it’s extremely likely you have thought about or heard about the benefits/drawbacks for a foreclosure.
A foreclosed home is when the owner is no longer able to make the mortgage loan payments. Once this happens, the bank repossess the property to get ready to go back on the market. Recent events in the housing market have created this industry, and companies now have entire business models based on it. What is the biggest drive for people to find a good foreclosed home? Savings!
It is important to understand what you are getting yourself into when you buy a foreclosure. It comes with risk, and the reward can result in savings of thousands of dollars.
The State of Foreclosures Today (Early 2016):
You can go into any market and find a foreclosed home to buy. However, it is much more common for buyers and sellers to be patient and wait before they take the first bargain they see. This was much different than the 2007-2008 days.
Reports showed that Los Angeles and Orange counties showed a 15 percent drop, while Riverside and San Bernardino counties had a 17 percent drop in 2015. All over Southern California we are seeing this happen. RealtyTrac reported nationwide that residential foreclosures only saw a 3 percent decline.
What does this mean for you? One obvious drawback to this would be steeper competition and greater chance at a bidding war. Since these homes come at a great price, less on the market means the ones left become more desirable.
There is no better resource about local neighborhoods than real estate agents. Real estate agents will have experience and extra certifications to deal with foreclosed properties.
The draw to a foreclosed home is getting the home at below market price. This can increase your chance of making money on your home in the long run. If you are home appreciates and you decide to sell, you could be in for a large increase in value. If you want to take advantage of a foreclosed home, just make sure you are aware of the process, and if the financial gain is worth the potential headache of dealing with unknown circumstances.
Do these 3 things if you are looking to buy:
Prepare your Finances:
If you are trying to get a home at discount, don’t spend your entire budget on the price of the home. A foreclosed home can have fees and hidden cost that are hard to anticipate. If you are spending all your money to get a home purchased, you run the risk of not being able to cover future expenses. Adjust the price of your home accordingly. Fees to research foreclosures, repairs, and inherited liens can add up quickly.
Find a trusted team:
Two different types of people will be important during this process. A real estate agent and the best contractor you can find. If you are uncomfortable with the paperwork and need more security, you can look into getting an attorney as well.
Current Home Situation:
The most important thing about getting a foreclosed home is acting quickly when you find the right deal. However, you must be flexible in when you can move into your recently purchased property. The reality is the sale can fall through at any time, you would be smart to consider options if you need to move into a home by a specific date. For example, a homeowner in pre-foreclosure could come up with the money to put their loan in good standing at any time.