After a homeowner is unable or unwilling to pay the mortgage for several months, the home goes into foreclosure. When a home is in foreclosure, the homeowner loses all rights they had to the home.
Foreclosed homes are sent to a public auction. If the home doesn’t sell there, it becomes the property of the lender to whom the mortgage was owed.
Buyers find a lot to like about foreclosures. They can be a great deal, allowing your budget to buy a home you may normally not have been able to afford – a bigger home, perhaps, or a home in a better neighborhood. Foreclosed homes are also often sold for less than similar homes on the market, allowing you to see financial gains right away. Because they are often vacant, the move-in process can be quicker than if the home was occupied.
But buyers of foreclosures should also exercise caution. Foreclosed homes are sold as-is. When a homeowner can’t afford the mortgage, they also often can’t afford to make repairs. Foreclosed homes frequently sit vacant for long periods of time, leading to problems or damage caused by neglect.
If you’ve found a really good deal, be prepared for competition. Banks want to get the most they can for a foreclosed home, so there’s no guarantee your offer will be taken. There’s always a chance a higher offer will come in. And because banks want to get as much as possible for the house, you have little room to negotiate a price down. There will be no allowances for repairs; remember, these homes are sold as-is.
The best route if you’re interested in buying a foreclosed home is to find an agent who is experienced in dealing with foreclosure sales. They can guide you through the process, allowing you to make educated decisions.
And remember: You also have the right to — and should — choose the title company that handles your closing to ensure your ownership is secure and guaranteed.