In foreclosure situations the bank brings a foreclosure action against a home owner. Sometimes, after many years, the bank successfully takes title of the home. They evict the family who lived in the home. There can be significant financial benefits from buying a foreclosed home. However, there are also a variety of potential drawbacks.
Was The Home Properly Maintained?
If a homeowner was unable to make his or her mortgage payments there is a substantial possibility that the home was not maintained very well. Homeowners who can’t make mortgage payments don’t improve their homes and often don’t fix things that break. There is also the possibility that the homeowner, when he was being evicted, engaged in malicious conduct damaging the home.
The following is a list of things you should look for before purchasing a foreclosed home:
- Is the home neat and clean? Sometimes bank foreclosed homes have been sitting empty for long periods of time. No maintenance or cleaning has been done and the houses have fallen into disrepair.
- Is the home legal? Sometimes homeowners modify, extend, and change their homes without getting the appropriate approval from their local building departments. This makes title unmarketable. In the foreclosure process whether the title is marketable or not does not come up. However if you buy the home and thereafter you decide to sell it you will be responsible for legalizing the home. This can involve thousands of dollars of modifications, application fees and legal work.
- Has the home lost electricity? If the home was vacant for a long period of time and the electricity was cut off this can have a negative impact on the electrical appliances in the house.
- Water damage. If there have been leaks in the home while it was empty it is possible that the home has suffered from water damage.
- Low quality upgrades to the house or poorly done repairs. Sometimes the homeowners are short on money, they take short cuts when the upgrade, modify or repair their homes. The expression “A stitch in time saves nine” may apply in these cases. These poorly done upgrades or repairs may not last very long.
- Overgrown property. Homeowners who can’t afford to maintain their homes often fail to maintain their yards and lawns. The property may be overgrown and/or may require extensive landscaping.
- Vandals. Homes that are empty have a higher propensity to be vandalized than homes that are occupied residences. Vandalism can involve individuals breaking in to homes, breaking windows, damaging walls, and removing pipes in the basement to sell the copper or brass.
Although there are bargains to be had in buying foreclosures, be careful! You should carefully inspect the home before purchasing it. It is suggested that, you have an engineer write an engineering report on your home before buying a foreclosure. The price may be cheap on a foreclosed home but the real question is have you bought a bargain or a money pit!
