Advantages and Disadvantages of Bank Owned Homes

When we look at the state of the American economy, especially in house, it is hard not to cringe. All around the country homes are being foreclosed, banks are losing money, and jobs are being lost to down sizing and company re-organization. While this situation is the cause of much turmoil and headache for some, it provides those who are in a position to purchase new property a new niche of opportunity.

As with any opportunity there are certain benefits and drawbacks to this scenario. As an investor or someone looking to purchase a home in foreclosure it is important to take note of these things and decide whether foreclosure investing is right for you. In an attempt to answer that question let us have a look at the advantages and disadvantages of bank owned foreclosures .

One of the largest and most obvious advantages of a bank owned home is that it is not being sold for profit. The financial institution that foreclosed is looking only to re-coup it’s expenses, and is looking to sell quickly. This means that potential buyers will be able to purchase bank owned properties cheaper than they would in a normal market.

Another advantage of the current market is the number of bank owned foreclosures available in the United States. It doesn’t matter where you go bank owned homes can be found. The abundance of real estate in this situation also helps drive the cost down and increases the chances for investors to purchase homes that will be profitable.

Because the properties are being offered at such a reduced price, turning the property into a rental house is a big advantage, and an overlooked one. A typical return on a rental property in the long term is very lucrative. If you are not interested in that type of arrangement, simply buying a bank owned property and reselling it on the regular market is often an option as well.

As with any investment opportunity there are disadvantages as well. One of the most common of these is the repair costs of a bank owned home. In a lot of cases these homes have been owned for years prior to the foreclosure. This can result in problems with the home that are not known the to lender. If these costs to repair a home make it more expensive that of a non-foreclosed home of the same quality in good condition, the invested would be rendered a loss.

The sheer number of investors looking to purchase foreclosures is another disadvantage. The competition means that potential investors will have to compete for choice homes and may not get the price they are looking for.

Not only the number of people looking to purchase the same types of homes, but the way in with a foreclosure operates can also be a disadvantage. Typically, homes are put up for auction on an advertised day. Everyone is privy to this and a competitor with simply more buying power can ruin all the leg work you have done to make sure your investment is sound.

Investing in bank owned foreclosures is not for everyone. There are obvious advantages, but you should be sure you are not overcome by the disadvantages when you go to buy.

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