Foreclosures could look tempting — especially in the market of today. Home prices are higher than 18% during the previous year while foreclosures often being priced at a big discount.
According to analytics company ATTOM Data Solutions, U.S. foreclosures were valued around 36% under traditional properties at the end of 2020. That is the difference between one $300,000 home and a $192,000 one — pretty big savings for the normal American family.
Still, despite the money a foreclosure could save you, they are not the best thing for everyone. Nor are they especially easy to find.
Are you considering buying a foreclosure as an investor? Here is what you should consider before you do this.
Repairs and renovations
Most foreclosures are sold “as-is,” meaning whatever the condition the house is in, that is what you get — so do not expect the seller to pay for your repairs.
Sometimes, that is not a big deal, and only minor problems exist — things such as chipped paint, holes inside walls, or carpet stains. In others, it is much more serious. You could have also have roof damage, problems with plumbing or electrical systems, some foundation problems, and a lot more. And fixing all of these? That is on you.
Foreclosures are not exactly easy to find these days. For most of this year because of the covid pandemic, foreclosures were restricted, which meant a limited amount of distressed properties that came to the market. As a result, there is little to choose from in numerous markets, and the foreclosures that are up for purchase come with stiff competition — both from traditional homebuyers and investors.
If you are looking for a quick and pain free transaction, a foreclosure is probably not the correct move. For one, the foreclosure process could take some time (the owner might not even be moved out by the time you buy). On top of this fact, the financing of such a property usually takes longer — especially if you are buying directly from a lender, bank or government agency.
Sometimes, offering cash can aid in speeding up the process, but it all is based on what stage the foreclosure is at. Normally speaking, you can expect purchasing a foreclosure to take a bit longer than a traditional property.
Author: Scott Dowdy