Have you ever wondered what happens to houses when mortgagors default their payments? Their properties are forfeited by the bank and are put out for sale as ‘foreclosed properties’.
Have you come across a foreclosed home during your home search? Wondering how to go about it? Before you go ahead, you need to understand the whole idea of a foreclosed house.
Purchasing properties that have been foreclosed is a little different from buying a typical resale property. There are different procedures involved and most importantly the criteria for judging such a house is completely different. Here’s a look at some of the most important factors that must be considered before getting into a deal –
1.Find Out If There Is A Need
While houses with small tags can be luring. It is important to prioritize the need for such a purchase.
The next important step is to decide how you are going to finance the property and what you aim to do with the property.
2.Have A Site-Check
Before you purchase the property, be sure to have a site check. This will not only help in knowing the property better but will also help in calculating an estimate of the amount to be spent on repairs.
3.Conduct A Thorough Research About The Neighborhood
Often, people get carried away by the low priced tag of the house and forget to conduct a background check of the area. Consequently, they end up in situations they hadn’t signed up for.
For example, if you don’t conduct a research, you may end up in a neighborhood where the crime rates are high or the area lacks facilities like schools, transit systems, etc.
4.Know How Long The House Has Been Unused
The longer the house remains vacant, the more prone it is to damage. These damages can arise anywhere from your plumbing system to your sewage system and can also have common consequences like leakage and clogging.
5.Pay Close Attention To The Landscape
Often the landscape of the house indicates the condition of the house. So, as you enter the property, look around, check if there are untrimmed trees, bushes and vines. If there are a number of them in the plot, they may have already caused damage to the property.
6.Arrange For A Private Inspection
The houses forfeited by banks are not in charge of anybody. Hence, the chances of them being vandalized, robbed and damaged are high. Thus, having your house inspected before purchasing is a sensible thing to do.
Once You Are Clear With These Factors, Use These Tips To Buy The House:
Buy During The Pre-Foreclosure Period
The period when the bank notifies the defaulter a Notice of Default (NOD), is called the pre-foreclosure period. This is a suitable period to buy properties, as the sellers are ready to sell the house for a huge amount of discount on the home’s market value. However, the risk involved in buying a house in this period is very high, especially for novices.
Avoid Buying A Home Through An Auction
If after the pre-foreclosure period, the borrower fails to repay the money, the bank puts the house out on sale. This is usually done through auctions where the selling price starts from the amount that is owed by the borrower to the bank.
Buying houses during this process, without a real estate agent is very difficult, as most of the auctioneers are seasoned real estate agents with deep pockets.
Another disadvantage of buying a house in this period is that the buyer doesn’t have access to the inside of a property. Consequently, the buyer has to accept the house the way it is.
Buying From The Bank
This is the safest way of owning a foreclosed house. While the process is lengthier than the traditional real estate purchase, you will still get a decent rate of discount on the market price. However, here it is necessary to note that this process is fraught with delays and problems.
While buying a foreclosed home may seem like the best way to get a real deal on your new home, it is more like a trade-off for your dream home. So, if owning a house is the only motive, foreclosed houses have a lot to offer.