The disadvantages of purchasing foreclosures
People are often lured in by the extremely low prices on foreclosures that fill oodles of online and television ad space. They often believe that they can stroll into a public or private auction and bid immensely low offers on these homes. The problem with this belief is that a majority of the properties are not allowing inspection prior to purchase. If one can get the foreclosure for an unheard of low cost, it may actually be worth the overhead of repairs to return it back to market value. Unfortunately, there’s no “what you see is what you get” when there is no access to view the inside of the home. Stop and consider these disadvantages before you commit to buying any foreclosure.
Who is the property occupied by?
When someone lives in the foreclosed property it will ultimately be left up to the buyer to evict the occupants. These could include friends, relatives, or renters of the previous owners. Often times, eviction can turn into a rather unpleasant experience.
- Always have legal representation before starting an eviction process if you aren’t 100% sure of how eviction works.
- When a forced eviction is unavoidable, the current occupants may react by damaging the property.
- You may actually get a more positive response by offering cold hard cash to get them to move out without incident.
Non-owner occupant homes
Non-owner occupant homes differ from owner-occupant homes in that they tend to have lower risk credit characteristics, but also weaker incentives to maintain mortgage or rent payments when properties go into foreclosure. This can sometimes lead to motions of deficiency judgments being filed against the seller. A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full.
Foreclosed property conditions
When owners are forced into foreclosure on their property, it isn’t unheard of for them to go numb, so to speak, with their responsibilities of upkeep on their home. They simply don’t care to spend money looking after their property anymore.
- Some owners will sell everything that can be removed. (From light fixtures to kitchen appliances. Sometimes even the kitchen sink, if they can get it out!)
- Owners quit putting forth any money or effort to fix things that have broken or need repairing.
- The extent of the damage that can be caused by a disgruntled homeowner is astounding! There are cases of destruction being so extreme that walls are torn down, rooms are flooded, and pipes or wiring are stripped out.
- Some of the most vindictive owners have even gone so far as to lock their “pets” or other animals inside the home to die and decompose.
Buying foreclosures should be entered into with caution. It is not a process for first time buyers to enter into and should only be tackled by the most seasoned of professionals. Sadly, these are the worst case scenario, hard core facts of foreclosures. Be sure to take them to heart.