Foreclosed homes are some of the best home purchase deals you can find but that doesn’t mean that you should through caution to the wind when considering purchasing a foreclosed home.
In fact, some foreclosed homes can end up costing you more money (or headaches) than they’re worth. Here’s what you need to know about purchasing a foreclosed home.
The first thing to understand is that foreclosed homes are often in a rough state. This may be partly due to the fact that the previous owner was unable to make their mortgage payments, and therefore, couldn’t afford the upkeep either.
Or it could be that the previous owner was imbittered about their home being foreclosed on and abandoned the home, or even outright vandalized the property.
These are some of the main concerns when it comes to the condition of foreclosed homes:
Foreclosed homes are often filthy because they had been sitting unoccupied for months --sometimes years! Plus the previous owner may have also added to the grime from neglect. Vagrants sometimes will occupy empty properties as well. To be frank, foreclosed properties can be so disgustingly dirty that professional, deep cleaning is necessary.
In an attempt to gain more income to pay their mortgage, the previous owner may have tried to convert areas of the home into a separate living space, such as turning the garage into a studio for rent.
Permits are expensive and take time to get approved so most likely these types of renovations are done haphazardly and without necessary city permits.
The neglected home could have been suffering from a leaky pipe or storm damage. If it’s been unattended for a long time, the damage could be severe and expensive to clean out and repair.
The previous owner may have left personal property behind or others may have even used the abandoned property as a dumping ground. There’s also the issue of items being removed, such as a water heater or air conditioning units.
Getting approval for a loan on a property that is deemed uninhabitable or appraises below the purchase price is unlikely. However, if you are paying for the home in cash, getting a mortgage on a significant fixer-upper won’t be something you need to worry about.
Seller disclosures let you know the history of the house and are one of the first ways to know what you’re “getting yourself into.” Since the bank is the owner of a foreclosed home and no one from the bank has lived on the property, they’ll be unaware of any existing problems. You’ll have to uncover them yourself with a home inspector.
As high as the risks are and as much work as foreclosed homes entail, they’re still an attractive investment opportunity. House flippers and investors looking for a rental property are always on the lookout for a sweet deal.
Foreclosed homes aren’t your only option for getting a good deal on a fixer-upper! Did you know that there are home loans available specifically for renovations? Contact us today to learn about renovation home loans and you’ll see that getting a deal on a fixer-upper isn’t such a headache after all!
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 19161
Registered Mortgage Broker-NY State Department of Financial Services NMLS #19161
7448 Amboy Road
STATEN ISLAND, New York 10307
Phone: (718) 356-2900
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