Foreclosed properties: Should I invest in these?

2014/10/foreclosure-300x168.jpgOne person’s trash can be another person’s treasure. This is sometimes well and true, especially when you see that buying foreclosed properties from a good standpoint. Buying foreclosed properties can be a good thing but you should also consider the factors and its pros and cons before diving into this certain decision. First, we should start with the low down about foreclosures.
What are foreclosures? Foreclosures are simply the legal process of attempting to recover the balance of the loan from the borrower who has gone to default in making their mortgage payments. There are 3 types of foreclosures:
• Judicial foreclosure – under the supervision of the court
• Nonjudicial foreclosure – this is authorized when a power of sale clause is included in the mortgage
• Strict foreclosure – process wherein the court orders the mortgagor to pay the mortgage within a certain/ specific period of time
Enough with the complex terms of foreclosures, and let us now get down to the benefits of buying a foreclosed property and also provide you with its disadvantages to help you come up with a balanced and informed decision whether to pursue it or not.
Advantages:
Better value for your money – enough said, since most banks will try to sell the property as quickly as possible, the price of the property is more often than not, lower than its value. This is quite an advantage especially if you have bought a foreclosed home that is situated within good neighborhood. The value will appreciate and more likely to profit from your investment.
Lower down payments – For first time home buyers, down payments can tend to be the most intensive part of buying a property and more often than not, one of the factors why you can’t get your applied loan approved from the bank or other financial institutions. Since that most foreclosed properties has a lower price tag, it means that required down payment to acquire it is inexpensive as well.
Better neighborhoods – think of moving into a better neighborhood however the price tag just doesn’t seem fit? A foreclosed property will give you the chance to do so because they are, again as mentioned on the first two bullets – they are lower in price than the original market value.
Opportunity to build wealth – When a buyer acquires a foreclosed property means that they have more money to invest into other properties. Through time, more often than not, properties will appraise in value. If the buyer decides to sell the property, they will gain profit from what they have originally paid for.
And now for the disadvantages:
Foreclosed properties are bought “as is,” there are no insurance in place to take care of any builder’s defects compared to buying a new home. Also, it could also mean that the previous owners are still occupying the property while waiting for eviction.
In a nutshell, whether you have decided to purchase a foreclosed home or not, it is always best to speak to a professional real estate agent to help you with your decision. The Mid TN real estate market is stable and opportunities for buying and/ or selling a home is great.