For someone who is looking for properties to buy, foreclosure properties can be a great steal. Not only are they sold below the actual market value, but are also a great opportunity for a start-up business venture.
Foreclosure properties are recuperated investments of banks where they took it over from previous owners who can no longer settle their payments. The interesting point is while most foreclosed properties are alluring to one’s pocket budget, there are hidden problems that buyers may have to face.
Foreclosed properties are often called “distressed properties”; distressed because of the financial situation of the previous owner as well as the physical condition of the property. At any point, negotiation may be direct with the bank, which can be good, or in bad faith with the previous owner. And just like any business, if the numbers look good for them, they will sell; if not, they will not make a deal. With this given, this should also be considered first when opting to buy.
So, if a potential buyer asks if it is “worth it” to buy a foreclosed property, here are pros and cons you can share with your clients about buying foreclosed properties.
Low Down Payment: Not only are foreclosed properties at a bargain price, but banks also require lower down payments. They can require you to pay as little as five to ten percent. However, you have to take note that most banks these days do not just accept the first buyer willing to buy. Auction sales have been a trend which gets banks to generate more bids, resulting in a pool of buyer options, so the price may not be what you expect it to be, especially if there are many bidders interested in the property.
Low Monthly Payments: Coupled with a low down payment, you may also acquire a foreclosed property at low monthly rates, which can be payable for as long as fifteen (15) to twenty (20) years. Not bad, for someone who wants to start up a family and wants to build it in a decent home.
Clean Titles and Tax: If you are worried about whether you are buying a genuine asset, buying a foreclosed property from a bank will stop you from worrying. These properties, before being transferred, have been legally settled, including tax payments from previous owners.
Bought in “As Is” Condition: Commonly, foreclosed properties are in a deteriorating state. It would only be a miracle if you got the property in good shape. It is likely that you will have to spend money on repairs and maintenance, so this should also be included in your budget. From personal experience, there are instances that previous owners, in bad faith, can intentionally leave damage to the house, especially if they have been treated wrongly by the bank. Banks are not held liable for such actions, which leaves you at high risk.
Previous Owners Still Have to Move Out: In some instances, the bank may have had a hard time asking the previous owners to vacate the property. If you already bought the property, it will be then your sole responsibility to ask the previous owners to move out. This is another risk to consider.
Buying a foreclosed property can be a great deal, especially when they are at bargain prices. However, considering the pros and cons of it will save you from experiencing something that will make you regret it, so taking a careful approach with foreclosed properties is best.
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