Are Foreclosures Always a Good Deal?
Many people hear the words "foreclosure" or "bank owned" and automatically think it must be a good deal. Often times this is true, but not always. Generally these houses are priced well because banks do not want to own properties and want a quick sale. However, sometimes they can be over priced because the bank is so far removed from the actual property. In most cases, the seller is out of state and probably has never even seen the home. They may have a BPO (Broker Price Opinion) or an appraisal ordered from someone who is not even familiar with the geographic area, which leads to improper pricing.
Another thing to be wary of with foreclosures is the condition of the property. Sometimes you can find a bank owned property that is in great shape. More often than not, the homes are in disrepair. The previous owners lost their home because they did not pay their mortgage. If they didn't pay their mortgage, most likely they had financial issues and did not have the money to maintain the house properly. These homes can sit empty for months before even hitting the market, so problems may go unnoticed. Basement leaks, mold, and plumbing problems are just a few things you could discover during an inspection.
Another important thing to keep in mind is that a bank is the seller. With any foreclosure, expect mounds of extra paperwork which put more risk and liability on the buyer. Often times the buyer will be held responsible for fees that are customary to a seller, such as title insurance, transfer taxes, utility turn ons, sidewalk inspection and repairs, or other miscellaneous fees. The selling bank does not see you as a person, just a name on a piece of paper. So if there are loan delays or other issues, the seller may not be willing to extend deadlines or make concessions. They do not care about your personal circumstances. Each bank goes by their own rules, so read the paperwork carefully and choose a Realtor who is familiar with foreclosures.
If interested in a foreclosure, just be prepared for a few bumps and surprises along the way. With realistic expectations and a good home inspection, you can help ensure a foreclosure purchase is a deal that works for you.