What You Need to Know When Buying a Foreclosed House

Tired of renting, but have a limited budget for a new house? Foreclosed houses are great options for people who are on a tight budget. Foreclosure is when the mortgage company takes over the property because of mortgagor’s inability to keep up with their mortgage payments. A foreclosed house doesn’t necessarily have any negative history, the previous owner just wasn’t able to pay their mortgage on time so the bank now needs to sell the home quickly, even if there is no profit. But just like everything else, buying a foreclosure comes with some pros and cons. So what are the things you need to consider when buying a foreclosed house?

Personally check the house. Sure, browsing the internet can save you a lot of time when looking for foreclosed houses. But once you’ve made a short list of the houses that you’re interested in, be sure to visit each house. It may look good in pictures, but may look different once you see it for yourself.

Survey the neighborhood. Is it located in a safe neighborhood? Is it near the school or any businesses? Always keep in mind that this is an investment, so make sure it’s located in an ideal environment so the market value doesn't drop.

Ask how many years it’s been empty. If nobody has lived in the house for years, there is possibility for damages to the interior. Since nobody has maintained the house for years, molds and other bacterial growth might be thriving already. Bugs and rodents that are in the sewers may even have found the chance to get inside so be careful.

Budget wisely. Although the actual price of the house is cheaper, extensive repairs may be needed so it’s always better to allocate enough in your budget for repairs and renovations.

Do your research. Since foreclosed properties are real estate owned, the Federal Law would not require them to go through the disclosure process so you wouldn’t know the house’s history or the previous owner’s story. You can start your research with past permits and records in the city department to know what you’re getting into. 

Expect a longer process. Since you are dealing with a bank, it might take them longer to respond to you. Also, they will have their own process and contract that will protect their interests. Read the contract carefully as it may include “as is” conditions that can be a burden for you in the future.

Some foreclosed propertis do offer great deals. But you have to make sure you read the fine lines before signing the contract.