Congratulations! You’ve found the perfect home, had your offer accepted, and applied for a mortgage. You are on the home stretch! But there are some key things to be aware of before you close.
Pros And Cons To Buying Florida Foreclosures
Dated: January 31 2019
Buyers associate foreclosures with jaw-dropping good deals, and in some cases that may be true but there are many risk factors to consider. Buying a foreclosed home is increasingly popular thanks to TV shows like Flip Or Flop, but just because the pros make it look fun and profitable doesn’t mean that’s the way it always is. In fact, buying a foreclosed home is one of the riskier things you can do in real estate. That doesn’t mean you should give up all hope of buying a foreclosed home.
A foreclosure is technically known as a home that is offered for sale by the creditor or lender in order to get the amount still owed on the property. There are a couple of types of foreclosures:
“Pre-foreclosure”: A home that is at risk for falling into foreclosure but is still technically owned by the homeowner. Also known as a short sale, pre-foreclosures are sold by the owner. Since the owner is very motivated to sell in order to prevent a foreclosure from officially taking place, you may be able to score a better deal. But, sale prices must be approved by the lender and can take as long as 45-90 days to close, plus the seller still has to move out.
“Bank-owned” or “Real-estate owned” properties: A home that has already been repossessed by the bank or lender and is typically sold through auction.
Pros To Buying A Florida Foreclosure
-The greatest pro to purchasing a foreclosed house is the potential to get a better deal than the current market value is listed at. When purchasing a pre-foreclosure your chance of getting a good deal is high because the owner is motivated to sell. You also have the opportunity to walk through and inspect the home if the owner offers it for sale, which is not always the case once it goes into a bank-owned auction. Since the owner is representing the home there is less likely to be a big mess inside, which is often the case with foreclosures that have been left abandoned for months or even years.
-Even if a home is already bank-owned you still have a much greater chance of scoring a lower than market value price. The longer a bank owns a home the higher the associated costs, meaning the longer it’s been in the lender’s name the more motivated they are to sell it. At the same time though, the longer a property has been bank-owned the greater the risk for costly damages, some of which may be hidden beneath the surface.
-Foreclosures happen to all types of houses, in all areas and at all price points. Therefore, regardless of your budget or the type of home, you are looking to purchase there are potential foreclosures for you to consider.
-A foreclosure offers a unique opportunity to get a good deal on a house that likely requires some repairs and upgrades. Once you put in the elbow grease to complete these repairs your home will be worth a lot more than what you purchased it for regardless if local listings have increased in value or not.
Cons To Buying A Florida Foreclosure
-Large businesses with deep pockets commonly purchase foreclosed properties, potentially increasing the competition and purchase price.
-You can never assume that just because a house is in foreclosure it is a better deal. In some cases, especially with pre-foreclosures, the purchasing price is no less than the average asking price in the area.
-If you purchase a foreclosed home at auction you will have to pay cash on the spot, and you may not be allowed to fully inspect the home until after purchasing it. You need to get a really good price on a home that has not been inspected because repair costs could supersede as much as $50,000, depending what’s waiting behind closed doors.
-Even if you don’t have to pay cash on the same day of purchase, many lenders avoid offering loans for distressed or foreclosed properties.
-Foreclosures are sold as-is. If the previous owner was not able to pay the monthly mortgage, more than likely they did not keep up with other repairs. The longer the property has sat vacant the greater the risk for severe damage. As a result, foreclosures may include significant damage and costly repairs you always have to factor into the purchase price.
-Foreclosures may have liens attached to it or back taxes, all of which you need to be fully aware of before purchasing a home and inheriting these expenses.
To Buy Or Not To Buy A Florida Foreclosure
Buying a foreclosure offers a number of potential benefits but the risks can easily outweigh these potential perks. Long story short, you must be so careful when purchasing a foreclosure and the more you know about this particular niche industry the better off you’ll be.
If you are considering purchasing a foreclosure in Florida, Curri Properties is your go-to team! We are happy to help you find the best deals on the market with the least amount of hassles.
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