Advantages

One of the biggest advantages to buying a foreclosure is price. Often, sellers who are in the middle of a foreclosure are faced with the prospect of losing all their equity. They may be willing to sell for below the market value of their property in order to complete a sale, prior to the bank taking back the property. Also, once a bank has taken back a property in foreclosure, they are usually anxious to remove the property from their books and are willing to negotiate a favorable price for a quick sale. Some banks have departments devoted to handling the sale of properties they have taken back. These are called Real Estate Owned (REO) departments. Another advantage to buying foreclosures is that the sales can occur rather quickly due to the urgent nature of the circumstances.

Disadvantages

Strategies for Purchasing Foreclosures

When preparing to purchase a foreclosure, it is best to know as much about the property as possible. You should try to have a third-party inspector, such as a licensed general contractor, examine the property before you decide to buy it. Also, if buying from a bank, see if you can get the bank to agree to a home warranty policy that will protect you against major unseen problems, such as electrical or plumbing issues. If you plan on buying a foreclosure at an auction, do a thorough market analysis of the area prior to the auction, showing what homes are selling for. This information will help prevent the tendency to over-bid the price.

Considerations

References

Resources

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