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How much do you know about bank foreclosures? Many buyers do not even consider researching foreclosure properties in their home search. If you are under the impression that all foreclosures are bad deals, you could be missing out on properties with potential in your ideal location. A home becomes a bank-owned foreclosure when the homeowner defaults on their loan and the property is repossessed by the bank. Consider these key points to know about bank foreclosure homes. 

What are the types?

Bank foreclosures can take several different forms, as foreclosure homes can drastically differ in conditions due to how owners have treated them. While all properties that are repossessed by a bank is known as an REO, not all REO cases begin the same way. In some instances, the property is given a bank by the owners. In others, the bank repossesses the home because they were not receiving payments. 

What are common misconceptions about buying a foreclosure? 

There are several misconceptions about purchasing a bank foreclosure. One of the biggest misconceptions is that most REOs are sold at low prices. However, there is no guarantee that a foreclosure will sell at rock-bottom prices. In some cases, prices will only drop by a small percentage from the current market rate for similar properties in the area. If an REO property sits on the market for an extended period, lenders will drop the price because they are not in business to hold onto real estate. If a home does not sell, they will need to pay taxes on the property as well as pay for various maintenance costs. 

What are the benefits of buying a bank foreclosure?

The most appealing benefit of purchasing a bank foreclosure is the opportunity to strike a deal. While it usually takes work to negotiate the deal, you can save a significant amount of money on your next home by choosing a foreclosure property. Foreclosures can be excellent investment opportunities, leading to lower mortgage payments in the future. 

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Are you in the market for a home? Have you looked at any foreclosure listings? You may be surprised at what you can find. Try to keep these three crucial points in the back of your mind when you purchase a foreclosure. 

Banks will not retain real estate for long 

Banks are not in business to hold onto real estate, and they typically will not hold inventory for extended periods of time. Instead, banks are more interested in recouping their loans as quickly as possible. This point is especially beneficial to home buyers who are searching for great deals because banks will often drop the price of a home to get it off their books. The obvious downside to these price reductions is that they can create more competition. To separate yourself from others in the market, consider making cash offers or buying a home without any contingencies.

Buying a foreclosure can be a complex process

Buying a foreclosure is far different than buying a traditional home. This is because there are typically more obstacles to consider due to inherent complications with the process. When compared to a traditional home transaction, a foreclosure involves legal considerations, and the deals can take several months to close.

Not all foreclosures are good deals for buyers

The belief that every foreclosure is a good deal is a myth. This misconception often leads home buyers into money pits and additional challenges for the future. A vast majority of foreclosures will require repairs that can quickly become significant expenses. With this in mind, you should never buy a foreclosure without a thorough home inspection. A closer look at a property may show you that you are not getting as good of a deal as you once thought. 

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New constructions will always be among the most appealing properties in the real estate industry, as they are excellent examples of supply and demand. Since many people are looking to move into a brand-new home, many foreclosures are priced with a significant discount. Continue reading to discover the top benefits of purchasing a foreclosure in 2019.

Bargain buys

Banks are not in business to hold onto real estate. When it comes to REO properties, banks will generally seek to get them off their books as soon as possible. This is one of the many reasons why these homes are typically priced below the current market. Banks will typically wait for several offers on recently acquired properties in order to recoup as much of their investment as possible. One of the best ways to determine whether or not a home is set a favorable price is to compare it to others in the local market. The more you understand about the area, the better you will be able to differentiate the good deals from the bad ones. 

Build equity

You can generate a tremendous amount of equity by purchasing a home at a low price point. In some cases, a home may only need a few repairs to increase its value. In other cases, it may simply take for the surrounding neighborhood to improve and become more appealing to buyers. Regardless of the circumstances, it is fairly simple to buy homes under market value and flip them for a profit. 

Move-in ready potential

While this is certainly not always the case, some foreclosure homes are move-in ready. When most people think of foreclosures, they envision a decrepit property or a home that was vacant for a significant amount of time. However, there are foreclosure homes available today with zero faults. 

Get more for your money 

Many buyers are surprised to learn how much house they can get for their money with a foreclosure listing. While real estate investments often differ on a case by case basis, you may be able to find more than what you were looking for by researching foreclosure listings. 

Enjoy a larger location selection

If you have your heart set on a particular neighborhood, it is important to explore all possibilities in the area. You may discover that there is a foreclosure property is waiting for you around the corner.

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Are you interested in purchasing a foreclosure? While foreclosures often come with a bad reputation, they can also be perfect investment opportunities for the average homebuyer or real estate investor. Consider the following helpful tips for buying a foreclosure property so you can enjoy the benefits of a successful real estate transaction in the future.

Prioritize the inspection

Always have a home inspected before moving forward with an offer. Unfortunately, it is not uncommon for a lender to hide issues with a property from potential buyers. In many cases, a buyer will neglect to have a property inspected because the home is selling for a bargain price. With this, it is important to remember that while a home may appear to be nice on the surface, there may still be issues with the property. This is especially important when you are purchasing a home without repairs, otherwise known as an “as-is” condition. 

Expect repairs

In real estate, you ultimately pay for what you get. Rarely will you find a beautiful home priced well-below its market value. If you find a foreclosure that is priced low, you should be on the lookout for red flags. Expect a fair amount of work to be required for repairs, and understand that the price of a foreclosure will also reflect the condition of the home. It is common for foreclosure homes to be vacant for extended periods. With this, issues with pipes, heating, and cooling, can also be expected. If you are not especially handy, be prepared to hire a team of professionals and consider all information provided before making an offer.

Pay attention to the location

Location is one of the most significant determinants surrounding the price of a home. In many cases, a buyer will be shocked by the price of a home if they fail to fully consider its location. If a foreclosure is located in a bad location, expect the price to be lower than if it was in a better area. 

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Foreclosure properties are excellent investment opportunities for homebuyers looking for an excellent deal on their next home. If you are thinking of purchasing a foreclosure, it is important to recognize some inevitable complications in the process rather than the traditional process of buying a home. Continue reading to discover some of the most common mistakes made during the foreclosure buying process. 

Failing to check on whether or not the home is winterized

When purchasing a foreclosure, be sure to check to see if the property is winterized. With this, it is important to ensure that the pipes are in good condition for the coldest months of the year. Cracked pipes caused by freezing temperatures can leave your home vulnerable to mold by causing leaks. 

Failing to factor repairs into a budget

Before any real estate transaction, it is always a good idea to create a budget. Many people go wrong in this step by failing to factor repair and maintenance costs into their offer on a foreclosure. In this, it is essential to first calculate what you will need to spend to make the home livable. Failing to take this step seriously could lead you toward buying a home that you cannot afford. 

Failing to research how long the home has been vacant

Before you submit an offer on a foreclosure, investigate and learn as much as you can about the property. One crucial detail to consider is how long the home has been vacant. The reason for this is because the longer a home has been empty the more repairs you can generally expect. For instance, if a home has been vacant for an extended period, you should not be surprised if there are issues with plumbing (poor drainage and seals) or if you have an insect problem. 

Failing to request a private inspection

Did you know that the majority of banks allow for home inspections? In many cases, they even encourage it. A thorough inspection will detect damage and potential issues that would affect the value of the property. 

Failing to consider the surrounding neighborhood

It is important to put significant consideration into the neighborhood before you purchase a home. As you research a foreclosure, do your research on the area to see if there are other foreclosures in the area affecting the market.

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Foreclosure homes often carry a negative reputation in the real estate industry. When many people think of foreclosures, they imagine an abandoned property. While this is sometimes an accurate image, many foreclosure homes present excellent investment opportunities for buyers. If you are currently considering a foreclosure property as your next purchase, here are a few essential points to understand before moving forward.

Expect significant competition

Everyone loves to strike a great deal. One of the most appealing benefits of purchasing a foreclosure is buying at a discounted rate. This low price is due to banks and lenders who are looking to get these properties off their books as soon as possible. If you are looking to secure a foreclosure property, it is best to go directly to the lender in order to bypass the competition. In many instances, you may even be able to purchase a foreclosed home before it hits the open market. 

Budget for repairs

When purchasing a foreclosure home, it is crucial to factor in the potential repair and maintenance costs associated with owning the property. In many cases, foreclosures will require repairs if it has been vacant for an extended period. If a foreclosure is sold in an "as is” condition, you may also need to factor these additional costs in your initial calculations. Give yourself plenty of financial cushion with your estimates to avoid stretching your budget as you submit an offer.

Remember that bank foreclosures are safer deals

Foreclosures sold at auctions can be risky purchases. In general, if you plan to purchase a foreclosure, ensure that your transaction is made through a bank to choose the safest route for your purchase. Banks will allow you to inspect the home thoroughly, and they are also required to pay all residual back taxes.

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