Some people may be apprehensive about purchasing a property that has gone into foreclosure. This is perfectly understandable. Yet, despite a certain level of risk, it can be an amazing opportunity.
Foreclosure occurs when a financial institution becomes the sole owner of a property, most often because the former owners could no longer afford the mortgage payments. The bank then puts the residence up for sale on the regular real estate market to recover the loan. There is nothing to indicate that these homes have any issues or hidden defects; at least, no more than any other home being sold by a private individual.
Reduced Price
This type of house is purchased without the legal warranty of quality. This means that the buyer has no legal recourse if hidden defects should be discovered. That is the major drawback. This is why, to attract buyers, these properties are generally sold at least 10% below market value. The bank evaluates the state of the property, looks at the market, and will then determine an enticing price, at least usually. However, there are times when the home is listed at a price that is quite close to that of other comparable homes in the same neighbourhood. This happens when the appraisers hired by the bank are convinced that they will find takers quickly and at market value despite the lack of a legal warranty, such as when the house is in impeccable condition or in a highly desirable area.
For Individuals or Businesses
Anyone can acquire a foreclosed property, both private individuals and businesses. Indeed, business people or entrepreneurs who specialize in flipping real estate are frequently on the lookout for any new foreclosed house for sale. They all have their eyes peeled for that diamond in the rough. They can make a healthy profit by renovating and reselling it. Such a property may also interest a private individual who wants to become a homeowner despite their limited budget. Or again, someone who knows the former owner and can therefore be sure that the house has been well maintained. Every situation is different!
The Necessary Inspection
Whether you’re buying a residence from the bank or from a private individual, it’s important that you have it inspected before you sign on the dotted line. All the more so when a house is being sold without the legal warranty of quality. A building inspector will be able to detect incongruities and visible damage. Typically, a trustworthy inspector holds a college or university degree in a construction-related field. Many are engineers or architects. Don’t hire an acquaintance who works in the construction industry but that isn’t a home inspection professional!
Looking for a foreclosed house? Go to the RE/MAX website and check the “Foreclosed Property” option in the search tool. You can also contact a broker who will consider your criteria and take you on a tour of the properties that are right for you.