If you’re in the market for a new home, perhaps you’ve browsed listings and come across a foreclosure or two that you like. Maybe you’ve even noticed that some of these homes have listing prices that are below the typical market value in your area.
Buying a foreclosed home can be a great investment – but it also comes with its own set of risks and challenges. Here’s what you need to know if you’re thinking about purchasing a foreclosure.
First, it makes sense to understand exactly what a foreclosure is. A foreclosure is a property that has been repossessed by a lender because of nonpayment. These lenders, typically banks, then sell off the property to recoup their losses.
One of the biggest reasons that homebuyers purchase foreclosures is the potential to score a great home at a discounted price. Generally, banks are eager to get these properties off their books and are willing to let the home go for a price below comps in the area. Other potential advantages to buying a foreclosure include:
While scoring a great house at a low price seems like enough motivation to buy a foreclosure, there are certainly some disadvantages you should consider. These include:
The pros and cons listed above are just some of the issues you should consider when buying a foreclosure. If you’re serious about purchasing a distressed property, make sure to do your research and prepare for a closing process that can be more stressful and complex than a traditional sale.
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