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    Considering Buying a Foreclosed Property?

    Okay, so we’ve all heard the hype about the great deals available if you buy a foreclosed property. And while it’s true that good deals do exist, there are just a few things that you should know and consider when deciding whether buying a foreclosed property is right for you.

    First, the least risky way of buying a foreclosed property is purchasing an REO “Real Estate Owned” property. REOs are listed by a broker and allow the homeowner to have a proper home inspection and contingencies around title and financing. These properties are often in better condition, but they also don’t offer as deep of a discount. You can get a better deal if you buy a home at a real estate auction or buy a home “pre-foreclosure” where the homeowner essentially signs their mortgage over to you. These options are so risky that unless you are a super-savvy buyer or an investor, we really don’t recommend them.

    Another major concern about buying a foreclosed property is that you must buy it in “as-is” condition. This means that the bank that owns it is not going to make any repairs to the property or negotiate purchase price based upon the results of the home inspection. The home inspection is for your information and helps you decide whether you want to continue with the purchase or pull out based on the problems that were found.

    And often there are many problems. Sometimes these properties have been sitting vacant for months or years. Also remember that the previous owner lost the home because he/she could not afford it, so it’s likely that he/she also could not afford the maintenance required to keep the home in good, working order. Also consider that it is extremely traumatic for people to lose their home through foreclosure. Some of these people were victims of mortgage scams or other deceitful behavior. Many were very angry and hence, sometimes destructive to the home.

    Is it a big deal to buy a home that needs some repairs? It depends how much needs to be repaired and how much money you have. If you are a first-time homebuyer and you don’t believe that you will have a substantial emergency savings fund after you finish settling on your first home, we  do not recommend buying a property in “as-is” condition. If you don’t have money set aside to make necessary repairs to your home, you may end up losing it as well. Take our word for it. We have worked with people going through foreclosure and some of them fell behind on their mortgage payments after their roof was damaged in a storm or their water heater blew up. They never recovered from that financial hardship and some ended up losing their home. We don’t want that to happen to anyone else.

    Also keep in mind that depending what kind of loan you are receiving, your lender might require that the property pass an inspection in order to receive financing. First-time homebuyer programs like HPAP (Home Purchase Assistance Program) in DC, or even just an FHA loan, will require you to buy a property in “move-in” condition and most foreclosure properties are not considered “move-in” ready.

    If you do decide to go the route of buying a foreclosed property, make sure you choose a real estate with experience buying/selling foreclosed properties. And educate yourself as well to the best of your ability. On the plus side, there are government programs offering incentives for buyers to purchase foreclosed properties. We can tell you all about them if you’re interested.

    If you’re not into taking risks when it comes to buying your home, you’re in luck. There are still plenty of affordably priced homes on the market that are not foreclosures or short sales. As always, contact us if you’d like to learn more about buying in today’s market or if you have additional questions about foreclosures that we didn’t answer here.

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