With so many unoccupied homes still dotting the streets and cities of the U.S. following the housing boom and bust of the last decade, foreclosed properties continue to entice buyers with their low prices and seemingly limitless potential. And though there are always gems and great deals to be discovered within this strange and unique corner of the real estate market, buying foreclosed homes isn’t the right decision for everyone. Here are a few tips to help you buy wisely while avoiding common pitfalls of the foreclosure market.
1. Educate Yourself
Buying foreclosures can be considerably more complicated than buying other types of real estate, so it’s important to do your research before diving in. Horror stories are common in this market, usually coming from uninformed buyers who’ve taken out mortgages on foreclosed properties without much prior knowledge. To begin with, foreclosures involve a more complex process, and different laws, than other home purchases, and the more you know about the process, the better off you’ll be.
You also need to consider the unique financial considerations of purchasing a foreclosed home. You’ll find some great deals in today’s climate, but keep in mind that many will require significant additional costs in the form of necessary repairs. It’s also advisable that you work with a lender before making any offers. Foreclosures can move quickly, and you’ll want to know your budget off-hand—and be ready to prove that you can buy right away.
2. Get the Assistance You Need
Because of the additional complexities involved in purchasing foreclosed homes, you don’t want to make the all-too-common mistake of trying to do it all yourself. For starters, you’ll want to work with an agent who understands the foreclosure market and has relevant, local experience. You’ll also want to enlist the services of a lawyer, as most real estate agents won’t have the legal expertise necessary to navigate the tricky waters of local foreclosure laws.
As with any home purchase, it’s also crucial to have the home inspected by a professional before closing. The seller may have already transparently clarified that the home has certain specific problems, or that substantial repairs will be required, but that doesn’t erase the need for a thorough inspection.
3. Have a Long-Term Plan
In some cases, you may be purchasing a foreclosed property with the intention of flipping the house in the short-term future. Or perhaps you’re planning to quickly perform all repairs and move in, envisioning decades spent living inside. Either way, it’s important to know your long-term goals before buying foreclosed homes. The values of these homes are in flux, and may decline in the short term. In order to make a sound financial decision, make sure you understand both the market and your own objectives at the time of purchase.