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Foreclosure Investing

By Jynette DeMarco

Many foreclosures have occurred in recent years, bringing thousands of houses suddenly into the market. Many people see these foreclosures as the perfect opportunity to invest in a new home at a very low price. It is necessary for you as the buyer, however, to keep in mind that there are both rewards and risks to foreclosure investing.

Rewards:

  • You can save a large amount of money from buying a foreclosed home because they sell for substantially less than the market value of equivalent homes.
  • In the majority of cases you are dealing directly with the bank to buy the house. There are typically no third parties or other owners involved that could make the process more difficult.

Risks:

  • One hidden cost to remember is that you will often have to pay the back taxes on the house before you can claim ownership.
  • Any repairs or remodeling that the house might need are completely your responsibility. This means that you must buy the house in the condition that it is currently in.
  • Usually nobody wants to pay for the water, electrical, and gas systems do not stay running while the house is for sale. So even if you can get a home inspection done, it may be hard to tell how well these systems function.
  • Although extremely rare, the previous owners of the foreclosed home may still be living in the house when you decide to buy it. As soon as the house is in your name it is your responsibility to evict those people, which may be a very difficult task.
  • It is sometimes also possible that the previous owners of the foreclosed home could return and try to reclaim their old house after you have already moved in.

There are some definite risks and financial rewards to investing in a foreclosed home. If you believe that the savings outweigh the possible risks, buying a foreclosed home could be the perfect option for you.

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