5 Risks of Purchasing a Foreclosure
There are many ways to make money in the real estate industry, and people are always looking for an opportunity to invest. In some cases, an investor may consider purchasing a home which has been foreclosed, as foreclosed homes normally come with low asking prices. But is it really worth it to buy a foreclosure, and will your investment pay off in the end? Continue reading why it may be difficult to get a return on a foreclosure investment.
- You will be purchasing the house “as is”
Foreclosures occur when a lender repossesses a property from a borrower who failed to maintain the mortgage payments. The lender then offers the home for sale at a public auction for foreclosures. The highest bidder at the auction will purchase the condition as is, meaning there will be no improvements to the property prior to purchase, and all liens, unpaid taxes, and encumbrances will come with the property.
- The property may still be occupied
There are few things more awkward than buying a new home and immediately having to evict its previous owners because the property is still occupied. Unless you are familiar and experience with the process of evicting tenants, it’s helpful to have an attorney delegate this process for you.
- There won’t be any inspections
Normally, when you purchase a property that is not a foreclosure, you have the opportunity to have a formal inspection: first, when you visit the open house, and second at the time of purchase. When the home is a foreclosure, however, there will not be a professional inspection of the property, and chances are you will not enter the home prior to the foreclosure auction, either. Without an inspection, you will not be able to see what kind of condition the property is in or what repairs will be needed.
- It can be time consuming
The process of purchasing a foreclosed property is not the same as purchasing a regular property. Buying a foreclosure is more complicated as the process includes waiting periods which vary depending on what state you live in. Also, if you are purchasing the property from a bank, there are often multiple forms and approvals that are necessary to make the purchase. Purchasing a foreclosure can have many delays, and if the previous owners file for bankruptcy protection, it may even stop the sale.
- The property may not actually pay off
In the beginning, the lower price of a foreclosed property may seem enticing, but in the long run, it may not turn out be a good deal or a wise financial investment. After spending money to remove the liens, complete all the necessary renovations, and pay back taxes, the payoff for the property may leave you feeling disappointed.
The Boutty Law Firm is experienced in helping individuals and families throughout central Florida with foreclosures and other legal real estate matters. For more information, contact us at (407) 537-0543