If you’ve ever come across a foreclosed home as you were shopping for a home, you were probably intrigued at the price. Lenders typically charge the amount they need to make back to make good on the loan. If that amount is a lot less than what the home is worth, it can seem like a bargain. Should you jump on it or is it a waste of money?
Compare Offers from Several Mortgage Lenders.
What’s the Cost?
First, consider the cost. You should compare it to the cost of non-foreclosure homes nearby. Is it much cheaper or just a little bit? If the savings aren’t tremendous, you may want to save yourself the headache of buying a foreclosed home and just go the traditional route.
Now, if the savings are immense, you may want to explore your options. If you have your financing in place, you may have a good chance at securing the home. If there is high demand for the home, you may lose out to cash buyers if there are any. Lenders like cash buyers because they can close the deal in a matter of a week or two rather than the typical 30 – 45 days that financing can take. Assess the situation to see the level of interest in the home to help you decide.
What’s the Home’s Condition?
Now, putting the cost aside, you have to consider the home’s condition. It’s typically assumed that if the owners could afford the mortgage payment, they couldn’t afford the cost of the home maintenance. In some cases, foreclosed homes are destroyed. Appliances and fixtures are ripped out of walls, carpeting is destroyed, and there are holes in the wall. This isn’t the norm, but it gives you an idea of things you might expect.
Click to See the Latest Mortgage Rates.
If the home is in complete turmoil, the cheaper purchase price will suddenly increase. How much will it cost to fix the home up to make it livable? These ‘hidden costs’ are something you’ll need to take into consideration. If you need thousands of dollars to fix the home up it can suddenly make the home that much more expensive.
What’s the Area Like?
Remember, when you buy a home, you buy into a neighborhood or community. The surrounding area plays an important role in your home’s value too. If the area is run down or the majority of people don’t take care of their homes, your home may not appreciate as you’d hoped it would. If the average price is low in the area, there won’t be any comparable sales to bring your home’s value up where you want it to be.
If the area is decent, though, and there isn’t a large number of foreclosures or turnover rates, you may get lucky and see your home increase in value. Just because the home is being sold for what you think is a steal, doesn’t mean that it is in every sense of the word. Buying real estate means more than paying money to buy a home, it means making one of the largest investments of your life that is greatly impacted by many factors.
In order to decide if a foreclosed home will save you money, you have to look at the big picture. Don’t look at just the home’s price, but at the prices of the surrounding homes. Also, what’s the foreclosure rate in the area? How fast did homes appreciate lately? Finally, think of the home’s condition. It will be your responsibility to fix any issues with the home once you become the owner – this adds to the home’s cost, so factor it in when deciding.
Click Here to Get Matched With a Lender.