With the economy on its back, more homeowners are being forced to foreclose on their homes than ever. While this is tragic, it can also offer opportunities to people who would not otherwise be able to afford to buy a home. If you are in the market for a new home, you may be wondering about all the foreclosed homes out there for very low prices. While there can be some definite drawbacks to purchasing a foreclosure, there are also some pretty amazing benefits that come with that sort of purchase.
Buying Foreclosures: Circumstances May Vary
As with any situation, the individual circumstances will differ with each home. There are many different types of foreclosures, and some have more benefits or drawbacks than others. There are homes in pre-foreclosure, when the house is definitely going to be foreclosed upon, there are foreclosure auctions, and there are also homes that are already foreclosed and are owned by the bank. If you are interested in learning about foreclosures and specific properties, you should first find out what type of foreclosure you are dealing with, which will help you decide your next steps when dealing with the individual property.
There can be some major advantages to purchasing homes in auction. Those homes are going to sell for the amount that the homeowners owe on their mortgage, and are usually cash only. This presents two advantages. The first is that with the discounted rate of what someone owes on a mortgage, the cost of the property is usually much less that what it is actually worth on the regular market. The second benefit comes with the cash requirement. If a home is selling for cash only, then there will be far less people who are able to purchase the home. Thus, if a home in foreclosure auction interests you, and you have the money to buy the home with cash, then it will likely be yours with very little competition.
Buying Foreclosures Directly From a Bank
When you are buying a home from the bank, there are usually even more benefits, and even fewer disadvantages. For example, when you are buying a foreclosure that the bank already owns, it has already been through the auction process, and has had no takers. The bank is likely losing some money by keeping the property for an extended amount of time, and they are very happy to get rid of the home. Sometimes, they can even be desperate.
This desperation is definitely in your favor if you are looking to buy the property. There are many reasons that buying this type of foreclosure is more to your advantage than buying one of the other types of foreclosures. Included in the benefits are that, as opposed to an auction, you can have inspections of the home, and the bank may even pay for it. When you are negotiating with the bank, it is usually easier to negotiate lower terms, lower escrow fees, and quick turnaround.
By the time the bank has the home, there will not be anyone living there. This is good news because there is a lot of awkwardness that comes with buying a home from the previous owners, including sentimental attachments to the home and possible stresses and reasons for leaving it. When you buy from the bank you do not have to know about the baggage of the previous homeowners, or that they don’t want you to paint the kitchen a new color, etc. You can start from scratch and make it your own, while still getting the deal from the foreclosure price.
Buying a foreclosure can be a delicate process, and you should definitely get your accountant and lawyer involved. When you do your research and buy a foreclosed home with your eyes wide open, you can get a great deal and a new property investment.
Suzanne Richards writes for SecureInsuranceQuotes, where you can find homeowner insurance quotes.