What A Connecticut Buyer Needs to Know About Foreclosures
If you are considering an investment in a foreclosure, here’s everything you need to know about such a purchase:
Definition: A foreclosure refers to a mortgaged property which belongs to a homeowner but is seized by the lender because the owner is unable to make the mortgage payments consistently for a certain period of time. The property does not belong to the lender. He just takes possession of it to sell it and get his money back.
Pros of buying a foreclosure property:
- Great deals- The lender who is foreclosing the property does not wish to hold the property for a long time. So the chances of getting the home at a discounted price are high. The lender is usually willing to sell it at a lower price to get back the bulk of his capital.
- Moving up- This point is related to the previous one. Foreclosures can be found in every price range and the properties also vary from single family homes to luxury estates. If you are thinking of moving up, you can find a great home at a good price that you could not have otherwise thought of buying at the regular price. You can get a ready home for moving in and save significant amount money at the same time.
Cons of buying a foreclosure property:
- Lack of guarantee- The foreclosure buying process generally takes normal than usual because of the red tape involved. There is extra paperwork and the involvement of multiple parties- the property owner, lender and other lien holders. They all need to approve your offer price before the transaction can move forward. In some cases, lenders try to get a higher price for the property to compensate for the hassle. So negotiation can also eat up time. Even after agreement, there is no guarantee that you will become the owner because the contract can be canceled for any reason before closing.
- Repair costs and debts- Buying a foreclosure property is very risky because you inherit the debt that comes with it. The principal lender gets his money but the remaining debt in the form of unpaid taxes, equity loans and construction loans need to be considered. It can be a great financial burden on you. Also, the house may require repairs which the original owners may have neglected due to lack of funds. You need to check these damage repair costs and other debts associated with the property before purchasing.
It is important to be careful and thorough while buying a foreclosure property to ensure that you benefit from it rather than regret it later. Taking the help of a professional real estate buyer’s agent can be helpful.