For many potential homebuyers, foreclosure properties offer a more cost-effective way of becoming a homeowner. As a buyer, there are many pitfalls to avoid and benefits you can use to your advantage. Here are some tips to keep in mind while shopping for a foreclosure property.
Inspect the Home
Inspecting the home is considered a standard of home buying, but when it comes to purchasing a foreclosure property, some people skip this step. Some auctioneers do not allow interior inspections of the properties before sale. As a result, homebuyers could end up with a home that was intentionally destroyed by the previous owner.
If an auction house is not offering the right to conduct an interior inspection, look for one that does. Remember, if you purchase the property sight unseen, you could end up spending hundreds or thousands in repairing it.
Do Not Submit a Lowball Offer
Some homebuyers mistakenly believe that a seller will automatically accept any offer on a foreclosure property to try to save money. In some instances, the seller might be willing to accept a lowball offer, but this is not always the norm.
If the home is in a desirable neighborhood, in good condition, or is new to the market, the chances of getting the seller to accept a lowball offer are slim. Work with a real estate agent who is experienced in purchasing foreclosure properties to determine what a good offer is.
The agent will look at other foreclosure properties in the area that are similar in composition to the one you want and make a recommendation. Keep in mind that some sellers do lower the prices of home after a period of time. If the home you want is out of your range now, your agent might advise waiting to see if the price drops.
Be Prepared to Pay for Repairs
The seller of the foreclosure property might not be willing to pay for any repairs that need to be made to make a home livable again. If not, your home loan could be at risk.
Some lenders will not sign off on a loan for a home that is unable to pass an inspection. If that is the case with your lender, your lender could deny funding for your home until the repairs are completed. If the seller is unwilling to make the repairs, you will need to.
It is important to note that if you do opt to pay the repairs, the seller's willingness to let you do so is not an indication that your ownership of the home is guaranteed. If the sale does not go through, you could be out of money for repairs for a home you did not get.
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