Is buying a Foreclosure the Right Decision for You
When looking at a home that is going to become your primary residence a trend has been for people to look towards REO properties that banks own as some believe they can get a better deal. Quite often these properties are priced below similar homes but one must ask themselves a few questions to see if looking at foreclosures is the right decision for them.
The first most important question to ask yourself is are you in a position to deal with potential safety risks that may be posed by a distressed property?
I personally bought a foreclosure property three years ago for my primary residence. It has turned out to be a great investment, it was in relatively good shape when I bought it but the first 30 days of owning the property were a bit challenging. There were minor electrical issues, (non grounded outlets)(outlets without covers), the back door didn’t latch so there was no way to really secure the property until a new door was installed, we were doing all sorts of sanding projects removing popcorn ceilings which created a dust hazard in the home. There are literally hundreds of other small things I am not thinking of. Three years ago this worked out for my wife and I we got most of the major safety hazards cleared up in the first month or so and we were on our way to building equity in the home. That being said I am currently in the process of buying a new home right now and I would not have considered a foreclosure with these similar problems today because my situation has changed. I have a wonderful 8 month old son and can’t imagine trying to keep him out of all of these potential hazards. So what worked for our lifestyle at one point no longer works today. So ask yourself If I am considering buying a foreclosure can I deal with the inconveniences associated with one.
The second important question to ask yourself is do you have cash set aside to make the necessary repairs to bring the home up to a livable standard for yourself?
Its important to take thorough notes on the problems you see as well as account for problems you won’t uncover before moving in. Check the big ticket items. Is the furnace and Air Conditioner in good shape? Is the Roof Sound? Is there appliances? These and many other things need to be accounted for. You need to make sure you have ample cash and or available credit to fix these things right away. There would be nothing worse than moving into your new “cold” house in the middle of winter.
In conclusion buying a foreclosure can yield you some instant equity but make sure your at a place in your life and financially that you are ready to tackle to project. If you are you will be happy with the instant equity you will build, but if you are strapped for cash or have little ones you may want to reconsider, the risk vs reward.