Buyer Beware: Read This If You’re Considering a Foreclosed Home
(Daily360.com) – Buying a foreclosed home offers an opportunity to save a significant amount of money, but it also carries risks that the buyer should be aware of before taking the plunge.
Banks are often willing to take a loss to get rid of a home as quickly as possible, so they often sell abandoned homes below market value. But sales are “as is,” so the buyer may find hidden problems that cost thousands of dollars to fix. Foreclosed homes should be warned: Buyer beware!
What is a Foreclosed Home?
Foreclosed homes are classified under various conditions depending on state laws and where the house is in foreclosure. Typically, the bank will foreclose on a home if the buyer cannot pay for a certain period, usually three to six months. States handle the process differently, some requiring a judge and others not.
Possible examples of listing a home for sale include:
• The homeowner and the bank agree to sell the home and pay off the mortgage.
• The owner signed the home over to the bank.
• The house was auctioned, and the bank submitted the winning bid.
• A local or state tax district seized a home for non-payment of taxes.
Potential Pitfalls of a Foreclosed Home
Neglect and deliberate damage are two of the most dangerous aspects of purchasing a foreclosed home.
Homeowners angry about losing their homes often vandalize the property before leaving, punching holes in walls, dumping chemicals on the floor or drains, etc. It is better not to know about this damage when you buy a foreclosed home at auction that you may not see the inside of before you buy.
Unfortunately, if the homeowner can’t pay the rent, they probably won’t be able to keep the house. Lack of care can cause damage, either from water or from bad pipes, which can cause invisible damage to the home or damage the inside of the walls. Or another problem that can be expensive to fix.
Also, if the house is empty for several months, especially in areas with very cold or hot temperatures, it can be further damaged if the house is not adequately weatherized.
Another problem not seen before is the taxes owed on the house. New home buyers often have to pay these fees if they can’t work with the bank during negotiations to buy the home.
How to Avoid Hidden Costs
The best way to determine the condition of a closed home is to perform a physical inspection. BobVila.com has stated that the typical inspection will cost $300-400. This price can even be higher if the appraisal comes with hidden difficulties. It is worth it, however, as the inspection will determine if plumbing, electrical, and heating / AC problems have occurred. The condition of the roof and foundation will also be checked. A bank will not be willing to fix any issues, but the buyer will be aware of future costs when deciding what to offer for the home.
Checking tax records should inform a potential purchaser about any back taxes that may be owed on a foreclosed home. You can use a tax company to assist with this process.
If the home is being sold at auction and cannot be inspected, the buyer should, at the very least, walk around the property and look through the windows. Also, drive around the neighborhood to see the condition of similar homes. A real estate agent can also look for similar properties sold in the area to determine the value of the foreclosed home after repossession. Remember, a foreclosed home can save you thousands on your dream home, but it is essential to be aware of the risks that come along with your purchase.
Copyright 2022, Daily360.com