A foreclosed property can be a great bargain – just keep the pros and cons in mind to avoid the common pitfalls of buying a home in foreclosure.
What is a foreclosure?
Foreclosure is the process in which the lender tries to recoup the remaining balance on a home mortgage when the borrower is no longer capable of making payments. Foreclosed properties are also referred to as “real estate owned” (REO) or “bank owned” properties.
When a home has been foreclosed, it often means that the homeowner has either abandoned the property or willingly turned over the deed to the bank.
Foreclosed homes can go up for auction at the local courthouse or at a venue that has been chosen by the auction company. These properties can also be auctioned off online.
The starting price often reflects the remaining balance on the mortgage. It may also be priced lower in order to encourage higher bids.
There are two kinds of auctions – a lender confirmation auction and an absolute auction. In the former, the lender may not necessarily accept your offer, even if yours is the highest bid. In the latter, the highest bidder gets the home.
In some cases, property investors may start talking to homeowners before the foreclosure process becomes final.
Foreclosures present a great opportunity to buyers who may find homes worth less than market prices.
Foreclosures Hays, KS
You’re likely to find foreclosed single-family homes in Hays. A good number of foreclosed properties tend to be 3- or 4-bedroom single-family homes in excellent condition.
However, be sure to work with a local Realtor who specializes in this type of transaction. You might have to pay off the previous owner’s delinquent homeowners’ association (HOA) dues and property taxes. You might also be required to shoulder closing costs. An experienced agent will help you work out the details and figure out how much you’ll have to pay.
Some auction companies hold open houses before the auction, giving buyers the chance to view the property before placing their bids. If you’re seriously considering buying a foreclosed property, let the Platinum Group assist you. Call them at (785) 621-4663 or send an email to [email protected] for more information.
The advantages and disadvantages of buying a foreclosed property
One of the main advantages of buying a foreclosed property is the price – as mentioned earlier, you’re more likely to find a foreclosed home well below market value. Lenders are not allowed to profit from the sale of a foreclosed home. This gives you the opportunity to make a profit by buying low and selling or renting at a higher price.
The seller will also be motivated to make a quick sale, which means that you’ll get the keys to the property within a shorter timeframe.
And since foreclosure auctions require cash payments, you’ll be competing with fewer buyers.
One of the drawbacks is that the house might not be in the best shape – homes usually go into foreclosure because the owner was having financial difficulties. This means that they may have deferred maintenance and repairs.
Some auction companies may not allow for inspections prior to bidding, which means that you’ll be taking on a lot of risk. You can avoid this issue by going only for auctions that allow home inspections.
Knowing the pros and cons of buying bank-owned properties will help you make the best decision possible. Remember to work with a local expert who has experience dealing in foreclosed properties.