Essentially a foreclosure is a home that is bank owned. This typically happens as a result of previous owners defaulting on their mortgage payments. Because they could not afford to make the payments on the house, the bank reclaimed the home. Generally speaking this situation has pros and cons for a potential buyer.
Pros of shopping for a foreclosure
Typically (although not always) the bank is looking to recuperate the money it was owed by the previous owners. This means that a home may be listed well-below its value, or at a price that will cover the banks losses, rather than garner a large profit. This is not always true, however, so it is important for you to discuss the asking price with your realtor to decide if both the price and the property are right.
Cons of shopping for a foreclosure
There can be several crumby aspects of trying to purchase a foreclosure. Foremost is that it can take the bank days to respond to a purchase offer, which is frustrating. Secondly, in many instances foreclosures are sold “as is, where is.” This means that you as the buyer aren’t in any position to negotiate for much of anything. In a typical situation you could request the seller includes the appliances or repairs a hole in the wall, but with a foreclosure you get exactly what you see – and sometimes what you don’t.
Sometimes when a home is foreclosed on, the previous owners may have fallen behind on the maintenance of the property and this can mean big renovation bills for a buyer. In some cases though, a house may be in perfect shape, you really just have to do your due diligence to protect yourself and ensure you have all the relevant information on hand.
How do you find foreclosures?
There are foreclosure listings that your realtor will have access to. While some foreclosures end up in general real estate listings, like MLS, not all do and the ones that do may not clearly specify that they are a foreclosure. At the end of the day if you want to look into buying a foreclosure, your real estate agent will big your biggest asset and ally.
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