8 Common Myths About Home Foreclosures
Are you considering buying a foreclosure home? If so, there are a few things you should know. Foreclosure homes can be a great deal, but they also come with some myths and misconceptions. In this blog post, we’ll dispel some of the most common myths about foreclosure homes and help you decide if this is the right option for you.
Before we take a look at the myths, let’s first define what foreclosure is. A home foreclosure occurs when a homeowner defaults on their mortgage payments and the lender seizes the property. The foreclosure process can vary from state to state, but typically, the lender will sell the property in order to recoup the outstanding loan amount.
Now that we’ve defined foreclosure, let’s take a look at some of the most common myths:
One of the most common misconceptions about foreclosure homes is that they’re always a good deal. While it’s true that you can find some great deals on foreclosure homes, this isn’t always the case. It’s important to do your research and work with a real estate agent who specializes in foreclosure properties. This will help you avoid overpaying for a property.
While you’re not required to use a real estate agent to purchase a foreclosure home, it’s not recommended. The foreclosure process can be complicated and it’s important to have someone on your side who knows the ins and outs of the process. A real estate agent will also be able to help you negotiate a better price on the property.
Another common myth about foreclosure homes is that they’re all in poor condition. This simply isn’t true. While some foreclosure homes may need some work, there are many that are move-in ready. It’s important to do your due diligence and inspect the property before making an offer.
While some foreclosure homes are available for cash only, this isn’t always the case. You may be able to finance the purchase of a foreclosure home through a traditional mortgage lender. It’s important to speak with a mortgage loan officer to see if you qualify.
Purchasing any home, regardless of the fact it is a foreclosure or not, involves a certain degree of risk. However, this doesn’t mean that buying a foreclosure home is any riskier than purchasing a non-foreclosure home. The only time that you can expect a higher risk is when buying from a public auction. When this is the case, there is most definitely a higher chance that a home can end up being a poor investment.
Again, the only time a buyer would knowingly forego a professional home inspection is when they are purchasing the property from a public auction. At this time, many buyers, typically those in investment real estate or property flipping, will purchase a property without having inspections conducted and sometimes not having even seen the inside! These of course are exceptional circumstances and the general rule of thumb for someone who is looking to purchase a foreclosure to reside in should always get a professional home inspection done when buying any property, foreclosure or not.
One of the most common myths about foreclosure purchases is that they will be available for pennies on the dollar. While it is possible to get a good deal, the bank will likely be trying to collect as much as they can to cover the outstanding mortgage on the home. Also, since we also dispelled the myth that foreclosure homes are always in disrepair, the bank may be less likely to accept a lowball offer if the property is in decent condition and is located in a good neighborhood.
Whether or not a home was purchased through a foreclosure process typically will have very little to do with the future appreciation, depreciation for that matter, or a property. Alternatively, foreclosure homes’ value may actually quickly appreciate if they are in need of updates as new owners will likely put some money into the property to fix it up and make it their own.
If you have bad credit, chances are the bank that is selling the property will be less likely to want to finance the purchase. After having just dealt with delinquent payments, the lender is probably not looking to get back into a risky situation with the same property.
It’s important to understand the difference between buying a home through foreclosure and buying a home through a foreclosure auction. When buying a home through foreclosure, you are essentially purchasing the property directly from the bank or lender who has foreclosed on it. This process can take several months, and you will likely have to go through a lengthy approval process. However, once the purchase is complete, you will own the property outright.
When buying a home through a foreclosure auction, you are bidding on the property against other potential buyers. The highest bidder wins the auction and must pay for the property in cash within 24 hours. In most cases, the winning bidder will also be responsible for any back taxes or fees owed on the property. As you can see, there is a significant difference between these two methods of purchasing foreclosure homes. It’s important to understand the pros and cons of each before making a decision.
There are many myths about foreclosure homes, but it’s important to know the truth before making a purchase. These homes can be a great deal, but you need to be aware of the potential risks involved. If you’re thinking about buying a foreclosure home, be sure to do your research and work with a real estate agent who has experience with the process.
Thank you for reading!