Homebuyers are always looking for a deal on a home purchase. After all, who doesn’t loves to save some money? That’s precisely why some buyers choose to peruse foreclosure listings with the goal of getting a discount on an otherwise solid piece of property.
But while deals can certainly be had with foreclosures, these transactions aren’t necessarily cut and dry. There are some potential pitfalls associated with buying foreclosures that buyers should be aware of before they pursue this type of purchase.
Here are some important things that buyers should consider before buying a foreclosed property.
1. Have a Home Inspection Conducted
Although a home inspection should always be done on homes being purchased, regardless of whether or not they’ve been foreclosed, home inspections become even more much important when it comes to foreclosures.
It’s not uncommon for foreclosures to have some hidden issues with them, sometimes deliberately caused by the vacating homeowners themselves. For a few hundred dollars, a home inspection can give you a much better idea of exactly what you’re pouring your hard-earned money into.
Sellers are typically required to disclose all known issues with the home before selling, but when a home is being sold by the bank, this entity is not going to have the type of insight on the property that the previous owner may have had. That’s why a home inspection is so important.
2. Have the Title Searched
It’s wise to have a preliminary title report pulled on a foreclosure property that you’re interested in purchasing. This report will identify whether or not there are any liens on title that you could be stuck having to deal with. Be sure that no hidden liens or encumbrances are on the property that could become big issues in the near future.
It’s so important to make sure that title is clear and that the home truly is for sale. While not very common, situations like these can and do happen, without a title search and title insurance, you could be putting yourself at risk.
3. Assess the Surrounding Area
Of course, having the house itself thoroughly inspected and assessed is crucial, but so is examining the surrounding neighborhood that it’s located in. Look at how other homeowners care for their properties.
Are they keeping up with maintenance, or does it look as if most of the owners have let their properties go? Are there a lot of abandoned homes on the block? Are the surrounding businesses transient? Are there many businesses that are boarded up or have “For Lease” or “For Sale” signs?
You want to make sure that not only is the house in good shape, but that the neighborhood is healthy too.
4. Find Out How Many Other Properties in the Area Are in Foreclosure
One house in foreclosure on the block is already too many, but a handful is just too much. Too many foreclosures in one neighborhood could point to weakening prices and could be an indication that there’s a serious problem that needs to be addressed.
Even if you’re getting a good deal on a foreclosure, you could be investing in a dud if the surrounding market that the house is located in is trending downward.
5. Examine Price Trends in the Area
As already mentioned, you don’t want to invest in an area that appears to be experiencing some level of depreciation. As such, you’ll want to look at the trend in prices in the neighborhood.
Are they rising, falling, or have they just been sitting at the same level for a while now? Data like this can give you some insight into where the area is headed. It can also give you a better idea of how much you should be spending on a property in the neighborhood.
6. Have All Locks Changed
If you do decide to pursue a foreclosure purchase, make sure that you change all the locks on all doors. Not only could the previous owners still have their own set of keys, so could other people, including contractors, appraisers, and anyone else who may have been given access to the property. To keep you and your family safe, it’s important that all locks are changed before you even move in.
The Bottom Line
If buying a foreclosure is on your radar, be sure to work with a real estate agent who is well-versed in these types of transactions. Having an expert on your side can help ensure that you’re protected in all aspects of the transaction so you can get yourself a great house at a great price.