What to Expect when Purchasing a Foreclosure

by Toni Tice 11/01/2020

Image by Steve Heap from Shutterstock

An active housing market has reduced the number of foreclosed homes in inventory, but there will always be foreclosed homes available to purchase. Many buyers are not aware of what to expect when purchasing a foreclosure. Here are some home truths about buying a distressed home.

You’re not always getting a deal.

Many buyers believe foreclosed homes sell at rock-bottom prices. They expect massive and unrealistic discounts. While the bank may be willing to sell for well below the fair market value, their goal is to recover the loss they incurred when providing the original mortgage. Additionally, foreclosed properties may have long-standing maintenance issues that require a substantial investment to remedy.

The bank may not have the only lien.

A foreclosure removes the primary mortgage debt, but a distressed property may have other claims for money owed in back taxes, for mechanical work and contractors’ fees. A complete title search should tell you if there are liens that need satisfaction when you purchase a property. Your real estate agent can guide you in how to discover unsatisfied liens or judgments against the property

You may find maintenance problems.

Most owners do not simply move out of the property when they can no longer afford to make payments. When an original owner loses income, maintenance often becomes a low priority. And, if they have a medical disaster, a decline in health often means a decline in care for the property. Storm damage, pests, and other hidden issues mean damage to a home that gets overlooked when the owner has different priorities.

You may find vandal activity.

Although there are some stories of angry owners vandalizing the foreclosed property that they invested their life savings into, more often are issues with opportunistic thieves. They remove plumbing and light fixtures, paver stones, and other readily accessible objects from an abandoned property.

Schedule a thorough inspection before you purchase if possible so that you know what you're getting. Your real estate professional specializing in distressed properties can connect you with an unbiased inspector. They will report on your potential new home and help you uncover any hidden costs lurking there.

About the Author
Author

Toni Tice

Buying or selling a home is one of the most important investment decisions you will ever make. I am always honored and privileged when my clients put their trust in my knowledge and experience and invite me to join them in this personal journey.  

My client base is quite diverse ranging from first time home buyers, relocation clients, new construction homes, to experienced buyers and sellers who are either moving into larger homes or downsizing their current residence. I also successfully assist and refer many of my clients who are relocating out of the area with leading realtors across the country.