By Katie Wainman | August 18, 2020
When a home is in foreclosure, it means that the bank that lent the initial mortgage now owns the home. A home can be in foreclosure for a few different reasons, such as the owner being unable to make mortgage payments or maintenance issues that are too expensive to repair and make a home unlivable. For buyers, it is important to become familiar with the foreclosure process, as it can differ quite a bit from purchasing a regular home. Here is what you need to know about foreclosures:
Foreclosures are generally listed at a lower price than other homes for sale in an area. This is what often brings the appeal to buyers and can be a big advantage for people who are in need of a cheaper home. However, you need to keep in mind that the cost of renovations can add up quickly. Just because it is listed at a lower price, does not necessarily mean that it will be cheaper for you in the long run.
It is common that a foreclosed home has experienced neglect. It might have been vacant for years or the previous owner might not have treated it well. Banks are not going to fix up a foreclosed home, so it is up to the buyer to invest their time, money and energy into renovations.
If you have the capacity to do this, you could potentially turn a foreclosed home into your dream home! However, renovations can be hard to handle. Some foreclosures will require a complete do-over, including rewiring the electric, installing a new water heater and exterminating mold. Each home is different, but you will want to consider if major renovations are something you can afford and if you can handle the stress that comes with it.
Buying from the Bank vs. Auction:
When you buy a foreclosed home directly from the bank, you might have an opportunity to negotiate, but the bank will ultimately sell the home on its own terms. On the plus side, the bank will usually handle any evictions and obtain a clean title for you. As mentioned earlier, the home will probably be sold as-is, but you should be able to have an appraisal and inspections done before your purchase.
When purchasing a foreclosed home from an auction, the transaction is usually cash-only with no mortgage involved. This can be great if you are looking for a quick purchase, but you should be mindful that you would not be able to have an inspection or appraisal done prior to the auction.
Real Estate Agent:
If you think that buying a foreclosed home is the right move for you, you will want to find a real estate agent who specializes in foreclosures. Banks will work with Real Estate Owned (REO) agents who in turn work with regular agents to handle these transactions. Many banks will not even work with a buyer who does not have agent representation. Working with an agent who has experience with foreclosures is important because they will be able to help you negotiate, order the proper inspections, help make an offer and much more.
Buying a foreclosed home certainly is not for everyone, but it could be the right move for you. Start by searching for foreclosed properties in your area and visit https://www.crye-leike.com/blogs for more real estate tips and tricks!
ABOUT CRYE-LEIKE: Crye-Leike Real Estate Services (www.crye-leike.com), a full service real estate company for over 40 years, is ranked as the third largest independently owned real estate firm in the nation and the largest serving Tennessee, Arkansas, Mississippi and the Mid-South. Crye-Leike has more than 3,200 sales associates, over 800 employees and 140+ company-owned and franchise offices spread across nine states. It generated $6.5 billion in sales volume and 29,925 closed transaction sides corporate wide in 2019 - its biggest year ever - and is on track to achieve the company's goal of $6.8 billion in sales volume this year.