Foreclosure property can be a great way to get a bargain on a new home, however, you need to be aware of the potential risks associated with foreclosures. You should avoid buying certain foreclosure.
Foreclosure property can be a great way to get a bargain on a new home, however, you need to be aware of the potential risks associated with foreclosures. You should avoid buying certain foreclosure.
Homes with Multiple Liens
In some states, you can get stuck paying liens on a property that aren't your responsibility. Properties can have multiple liens against them in addition to the mortgage. These liens might include:
- Back taxes
- Home equity loan or line of credit
- Contractor's lien
- Unpaid child support
Liens are placed in a hierarchy of importance, with the mortgage typically holding the first position. When the mortgage lender forecloses, the secondary liens are often released. Liens can still be on the property title after foreclosure though. You should do a title search on any property you want to buy and avoid properties with encumbrances.
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Occupied homes
A property can be foreclosed and still occupied. Residents may be the previous owners or renters. They may even be squatters. Depending on the laws in your state, you may have to handle the eviction or hire an attorney to do an eviction if you purchase the home. Depending on the state in which the home resides, the tenants may be able to claim squatter's rights which allows them to stay during the court procedure.
Homes with Extensive Damage
As you shop for foreclosure listings, don't be swayed by the pictures you see online. These homes almost always have damage, either from the previous owners or vandals or simply from sitting vacant for too long. Sometimes, the copper piping is stripped, and the major appliances may also be gone or damaged. Because they are sold as is, you won't be able to ask the seller, who is usually the lender, to repair serious damage before you buy. Often, the lowered purchase price can counter this damage but not always. Make sure you can see the home before you buy it and take the time to calculate what the damage will cost to replace. Avoid any foreclosure property that will cost more than it is worth to repair and make livable.
If you are aware of the potential risks of some foreclosure property and still want to buy a distress home, get help from a real estate agent or lawyer. Reply! can connect you with professionals in your area and provide foreclosure listings.