THE PROS AND CONS OF BUYING A FORECLOSURE

As home prices nationwide have skyrocketed in the wake of the pandemic, many buyers have become desperate to find affordable properties. One option is to consider purchasing a home in foreclosure, which occurs when the homeowner fails to make their mortgage payments as agreed and as a result, the lender seizes and attempts to sell the property. While the most compelling reason to buy foreclosures is that they tend to be priced significantly below market value, there are other pros and cons that buyers should know about. For example:

Pro: Foreclosures tend to have a quicker closing process. On average, the closing process for buying a foreclosure takes about 30 days from beginning to end—compared to 54 days for standard sales.

- Con: Most foreclosures are sold “as is,” which means that the seller will not make any repairs or guarantees that everything in the home is in working condition. In fact, when purchasing a foreclosure, you may not even be able to tour the property or have it professionally inspected. This could mean that if your bid is accepted, you may find yourself needing to make costly repairs.

- Pro: Foreclosures may offer a powerful investment opportunity. Since most homes in foreclosure are priced below market value, they are often sought by “flippers” and other investors looking to make the needed upgrades and then resell the property for a quick profit.

- Con: You may need to buy the home with cash. Many foreclosures are sold at auctions, which often require cash bids. And whether or not this is the case, you may need to have a significant amount of cash upfront to cover the costs of any necessary repairs.

Source: thebalance.com