You may believe the low price of foreclosures corresponds to a great deal, yet there are many buying foreclosure risks. It is very important to understand the most common risks associated with buying these homes before you make a purchase. Understanding the common risks helps reduce the possibility of later regretting your purchase. Let’s take a more in-depth look at some of these risks.
1. One of the biggest risks you take when you buy foreclosed homes is that the home will require major repairs. In some cases, the damage may be only cosmetic, but the risk of major damage is high.This is because foreclosed homes often sit empty for extended periods of time. When a house is left unoccupied and unmaintained, it may suffer major damage from the elements. This exposure can lead to such problems as roof leaks from storm damage or plumbing damage caused by frozen pipes. It is also common for wildlife to make their homes within the walls of vacant homes and damage electrical systems. What makes this such a big risk is that foreclosures are sold “as-is” and without any type of warranty. Any of the repairs needed to bring the house to code are your responsibility upon close of the sale.
Possible home damage is just one of buying foreclosure risks. Another one of the risks is that you may not be able to secure financing in time. Some lenders will not finance a loan for the purchase of a foreclosed home without setting conditions. To improve your chances of getting a loan in time, consider getting pre-approved financing before you make an offer on a foreclosed home.
2. Another buying foreclosure risk common with this type of purchase is that foreclosure listings are not always as readily available as other home listings on the market. In some cases, you may have to make a silent bid in an auction to purchase a home that has been foreclosed. If it is possible, inspect the inside of the home before placing a bid.
3. Another risk of foreclosure purchases, depending on the state in which the property resides, is that the former owner may exercise his or her right of redemption after you buy the property. In many states, the former owner has the right to buy the home back within a set amount of time after an auction or sale. Your down payment or bid would be refunded, but any other costs incurred would not.
4. Liens on the foreclosed property are another risk. You need to research the property title before buying or bidding because the information is not always available with the property information.
When you are aware of the most common buying foreclosure risks, you can avoid them and the repercussions.
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