Many buyers are looking for foreclosures, assuming they are great a great value.
Here are 4 reasons why foreclosures aren’t the deal you think:
1. Foreclosures allow little wiggle room in price. Foreclosure pricing is unemotional and methodical. Banks or governments who own foreclosed properties use an appraisal process to determine the fair market value and set it accordingly. And they usually are not in a hurry to sell.
2. Foreclosures limit your options. Buyers who focus on foreclosures, rather than the broad market of homes for sale in their price range, miss out on similar properties sold by individuals, who might be more willing to negotiate and more flexible in pricing. Individuals usually have greater motivation to get the deal done than large institutions. In a tight sellers market, buyers do well to expand their search as much as possible.
3. Foreclosures are usually in worse shape than individually owned houses. Foreclosed homes are often vacant for much longer periods of time than homes held by individuals. And the prior owner probably let it to fall into disrepair as foreclosure became imminent. Systems like heating and air conditioning (HVAC), water heaters, pluming, and the roof all deteriorate faster when a home is vacant and not cared for.
4. Foreclosure transactions always favor the seller. In a regular transaction, the buyer and seller are on equal footing. They usually use standard contracts with standard terms. And with the help of their Realtors, they can both negotiate the terms. Not so with foreclosures. In most cases, the owner (a governmental entity, a bank or another corporation) provides their own forms, terms and conditions for the deal, none of which can be negotiated, and which are generally less advantageous for the buyer than the regular forms.
Don’t get me wrong, there are times when buying a foreclosed home works to the buyer’s favor. But in most cases, the best deals are found by seeking out fairly-priced homes owned by individuals. For example, some of the best deals are from inherited properties: dated homes, fully paid for, in good condition that adult children are ready to sell.
This is just the tip of the iceberg. Here are 10 more reasons that will make you think twice about foreclosures.