Banks frequently sell foreclosed homes at attractive prices that appeal to investors and first-time buyers, but is it worth the risk? Before you schedule a showing or make any offers, you should fully understand the potential dangers of buying a foreclosure property.
Some people will take just about anything before a lender forces them to move out. Bank-owned properties may lack fixtures, moldings, appliances, and HVAC equipment. Unfortunately, prior residents might have carelessly or intentionally damaged a house that you want to buy.
Owners and banks often neglect to maintain these homes for long periods of time. When a building sits vacant, minor problems go unnoticed and become serious. You’re also likely to find overgrown grass that you can’t easily mow.
A vacant house may fall victim to thieves, vandals, and pests. If temperatures drop below freezing and the home hasn’t been winterized, pipes might freeze and burst. Unaddressed plumbing and ceiling leaks can lead to severe mold problems.
When you visit a foreclosure property with a real estate agent, you may not be able to test the water, gas or electrical systems. The bank might refuse to activate utilities or only do so after receiving an acceptable offer. Don’t forget to bring a bright flashlight.
Disclosures and listings usually provide few details on foreclosed homes. The banks know relatively little about these properties. However, a real estate agent might be able to obtain an old listing or disclosure if the previous owner tried to sell the house.
With enough research, you may get a better idea of why a specific foreclosure took place. It could’ve happened because the house has a flawed design or location that results in huge maintenance costs. On the other hand, the owner might have fallen ill or passed away.
Although the problems of bank-owned dwellings may seem daunting, it’s important to realize that some non-foreclosure properties have equally serious defects. A foreclosed home might prove appealing if it hasn’t suffered extensive vandalism or sat vacant too long.
Foreclosure properties offer a few advantages. There’s less money to risk; banks normally price homes in a realistic way and don’t feel an emotional attachment to them. You may find it easier to thoroughly inspect a house without any occupants.
The bottom line is that bank-owned properties tend to have more problems than owner-occupied homes. Nevertheless, you can greatly reduce the risk level by performing adequate inspections and research. Some homes represent excellent investments while others are beyond repair.