Many American citizens with a low budget may weigh the option of buying foreclosures which are available at steep discounts. In fact around 3 million to 3.5 million properties are expected to go into foreclosure in 2010 compared to 2.8 million in 2009.
If a property is in “Foreclosure”, it means that the home owner has defaulted on his mortgage payments and the lender as a result has taken possession of the property.
There are three situations in which you might consider buying a foreclosure. If the owner is surely moving towards losing his home, he might consider the option of ‘pre-foreclosure’. Here the owner and seller offer you the home at a great discount.
A second situation is attending public auctions of foreclosures. This offers plenty of benefits in terms of low cost but also there are risks as you are not allowed to inspect the condition of the property. The third situation is to buy from the lender who has taken over the property. The third option is ideal as the lender is highly motivated to get rid of the property. So you get the property in good condition and for a steal.
Despite the low cost, some buyers may have some apprehensions regarding purchasing a foreclosed home. Many potential buyers are often worried about buying bank or real estate owned properties due to complicated methods of buying a foreclosure. They are also worried about the condition of the homes. The solution is to contact a real estate agent who is an expert in foreclosures and this might reduce the worries of buyers and enable them to find an excellent deal.
There are banks which offer incentives to buyers of foreclosed properties. For e.g., they may pay up 3.5% of the closing costs of a buyer as well as warranties or even cost of appliances. Some who are interested in Fannie Mae properties can sign up for a Home Path program. This program gives to buyers an offer of reduced down payments, also relaxed standards of credit and waiving of requirement of appraisal.
The negative aspect is that buyers of foreclosures are advised to conduct an inspection before investing money. This is because traditional rules of disclosure regarding defects and repairs are no longer valid. Also, most bank owned properties have had their utilities like electricity and water supply shut off.
Potential buyers must weigh their options like their financial situation before investing in foreclosures. It has its benefits as well as detriments. Mortgage loans may be easy to obtain, but condition of foreclosures must be considered.
