For anyone who has ever been looking for a home within a tight budget, you may have had the opportunity to consider a home that went through the foreclosure process.
The length of a foreclosure process varies by state. In Pittsburgh and the surrounding areas, a lender must use the judicial foreclosure process because that is Pennsylvania law. The judicial process in Pennsylvania reportedly takes 90 days.
Purchasing a foreclosed home isn’t always a bad decision. You can often find diamonds in the rough at a low price. If the home is in the pre-foreclosure stage, you could get it through a short sale. If a bank is motivated to sell the property quickly, that could be a good negotiation tool for you. It is also a plus that you won’t be responsible for any liens or back taxes from the previous owner since the home’s title is cleared.
Dangers of Purchasing Foreclosed Homes
Although foreclosed homes are sometimes great deals, there are some potential pitfalls that you should be cognizant of.
When dealing with a foreclosure, the occupant is often still in the home throughout the foreclosure process. How would you feel if you were losing your home because you couldn’t afford the payments? Some people would take it with grace, but that’s unfortunately not always the case. There are many instances where the occupant damages the home out of spite and hurt feelings. For example, they may leave holes in the walls, destroy appliances, let their pets urinate and defecate on the floors, etc. If you ask a real estate agent, I’m sure they could tell you some horror stories.
The bottom line is that you don’t know what condition the home will be left in. If the property is at auction, you won’t even get to see the interior until you’ve already paid in full. Even if you are able to see the property’s interior prior to the sale, you may not be able to request repairs before buying the home. What you see is what you get. If the property is in bad shape or not up to code in specific ways, it may limit the possibility of some loans, such as an FHA loan. Although this varies on a case-by-case basis.
With the recent surge in real estate investors who flip property for profit, you may find yourself competing with other potential buyers for the same property. This is especially true at an auction. Before going in, set a hard budget for yourself and don’t pay more than you would earn from the property in the end. To give yourself an edge, have the required funds available to pay a foreclosed property’s outstanding mortgage balance to the lender.
For all the information you’ll need about risks and potential benefits of purchasing a foreclosed home, consult a trusted local real estate agent.