Every year, many homes in the United States are foreclosed due to problems such as failure to keep up with mortgage payments. While this is sad news for those that end up losing their homes, you also need to look at the flip-side of the coin. When it comes to foreclosed homes, it provides other people with an opportunity of snapping up a real bargain. In some cases, this could be people that would otherwise be unable to afford to purchase a home, so there is an upside to the number of foreclosed homes on the market.Many people wonder whether or not they should consider foreclosed homes.
However, there are so many benefits to purchasing foreclosed homes that it would be remiss of any potential purchaser or investor to dismiss this idea on the basis of some horror story or other that they may have heard. In fact, there are many advantages to purchasing a foreclosure, which is why so many people including property investors take such an interest in them.
What Is a Foreclosed Home?
A foreclosed home is a property that is sold by force because the owner is unable to continue making repayments on the mortgage. Because the property is basically the collateral against which the mortgage loan is secured, failure to keep up with repayments means that the lender can force the sale in order to recover the money owed. This then results in properties being sold via platforms such as an auction for a far lower price than the market value in a bid to secure a swift sale.
Is There a Downside to Buying Foreclosed Homes?
While there are many benefits that come with buying foreclosed homes, it is also important to remember that there is a downside as well. Many foreclosed homes have gone through a period of neglect, which means you may face costly and time-consuming repairs if you invest in one. Another downside of buying foreclosed homes, particularly ones that are in good condition or in desirable areas, is that you will face a lot of competition from other buyers including investors.
The Key Benefits of Buying Foreclosed Homes
The key thing to remember is that there are many benefits that come with buying foreclosed homes, which is why this is something that many people decide to do. Of course, you do need to take the downside of buying foreclosed homes into consideration as well in order to make an informed decision. However, if you get in at the right time and you find the right property, you may be able to snap up a real bargain and enjoy a host of benefits. Some of the main benefits that can come with investing in foreclosed homes include:
Getting a Great Deal
One of the main benefits that come with buying a foreclosure is that you have the opportunity to get a really good deal on the price you pay. When lenders foreclose on a home, their main objective is to get that properly sold as quickly and effortlessly as possible. The obvious way to do this is to let it go for way less than the market value. This is where you can make a killing by investing in foreclosed homes as it means you can snap up a serious bargain. Because lenders are so eager to get the foreclosed homes off their books as quickly as possible, you have the chance to get your hands on the property for much less than it is actually worth on the open market.
Of course, you do need to take certain factors into consideration. For instance, if the property has been neglected for long periods of time, there may be extensive and major work that has to be carried out. So, even though you have paid far less for the property than its market value, you may end up spending a fortune on repairs. You need to weigh up the possible costs before you determine how much of a bargain you are getting when you buy foreclosed homes.
Making Money by Flipping or Renting
For those that want to get involved in property investment, snapping up foreclosures could be a serious money-maker. If you manage to get your hands on decent foreclosed homes at bargain prices, you can then make money off your new asset with far greater ease. For instance, after snapping up the bargain, you can do the property up and flip it to make a short-term profit. The less you pay for the property, the more of a short-term profit you can make by selling it on as soon as you have made any necessary improvements.
Alternatively, you may want to consider a longer-term investment when you buy a foreclosed home. You can get a real bargain on a foreclosed home and then rent them out on short-term or long-term lets. This means you can make a steady weekly or monthly income in rent while also owning a valuable asset. If you buy foreclosed homes that are either in good condition or that you bring up to a good state of repairs, you should have no problem finding a steady stream of tenants. In addition, if you purchase a foreclosed home in desirable areas with plenty of facilities and amenities in the area, you will find it even easier to rent the properties out.
Chance of Better Financing
Another thing to bear in mind is that if you go for a foreclosure and you need a mortgage, you may be able to get more favorable financing from the lender. Obviously, when you buy a property on the open market, the lender does not have as much of a vested interest in your purchase. However, if you are buying a property that the lender has foreclosed on and is keen to get rid of, you could find that you are able to get a far better deal from them when it comes to getting finance.
If you are a cash buyer which many people who invest in foreclosures are, this is not something that will affect you. However, if you are one of those that do need to borrow the money to purchase the property, you naturally want to get the best deal. By choosing a foreclosure, you have a far better chance of getting a favorable deal from the lender.
A Chance to Buy in a Good Area
Whether you are looking to purchase a property for yourself to call home or whether you want to get into property investment, purchasing property in a good area can prove to be very expensive. Many people, therefore, end up having to buy property in slightly less desirable areas simply because of the costs involved. When you opt for a foreclosure, it gives you the chance to purchase a property in a very desirable area but without having to pay full whack as you would if purchasing on the open market. A foreclosure may present many people with an invaluable opportunity to own property in a good neighborhood that they may otherwise be unable to afford.
Vacant Possession of Property
One added benefit that comes with buying a foreclosure rather than buying on the open market is that you can benefit from vacant possession. If you are keen to move into the property or get your investment underway, getting stuck in a chain can be a real problem. It can end up costing you a lot of time and money especially if the chain is broken somewhere along the line, which can cause delays or even bring the process to a stop.
When you opt for a foreclosure, you won’t have this problem because the property will already be empty. This means you can benefit from vacant possession, which eliminates the risk of unnecessary delays or everything falling through at the last minute. This is one of the other main reasons why many people, both regular buyers, and investors, opt for foreclosures. The fact that there is no chain to deal with is a major advantage for many.
As you can see, there are many great reasons to consider investing in foreclosures, which is why this is something that many people decide to do. These homes provide you with a rare opportunity to snap up a real bargain when it comes to property. We all know that property is a great investment whether it is for yourself to live in as a home or whether you plan to sell it on or rent it out.
If you are able to get a great deal on the price of the property in the first place, this makes it even more of a shrewd and beneficial investment. With foreclosed homes, this is something that you have the chance to do. All you need to do is keep your eyes peeled for details of foreclosed homes, so you are always in the know when these bargain properties are available. You can then look forward to picking up a serious bargain.