Buying a foreclosed home can help you save money on the purchase, which is a real plus to real estate investors and house-flippers. However, these transactions are quite different from traditional home sales, and it’s important that you enter into the process fully informed. Forbes explains a few things you should expect when buying a foreclosed home
Foreclosed homes are sold as-is, which means any issues become your responsibility as the new owner. Accordingly, you should have money available for repairs and renovations so you can address any issues the home may have. Because the bank wants to sell the home as quickly as possible to recoup their losses, foreclosed homes are often sold at auction. In this case, you may need to have cash or certified check equalling the full purchase price of the home ready when attending the auction.
One major downside of auctions is that you won’t be able to look at the home before buying. An alternative is buying a real estate owned property, sometimes referred to as REO. These transactions are much closer to traditional home sales, in that you’ll be able to see and inspect the property before buying. You’ll also be able to purchase the home via financing, which makes it a bit more feasible for most people.
While you can have REO homes inspected, keep in mind that the bank will not cover any repairs. However, you should still have an inspection performed so you can understand the scope of work necessary to fix the home. If it seems unsalvageable or the amount of money you’ll need to spend on repairs far outweighs what you’re saving, the inspection will allow you to walk away from the sale and look to invest elsewhere.
