The Benefits and Risks of Buying a Foreclosed Home
Most buyers look at a foreclosed home as the ultimate steal; however, there can be many disadvantages to buying a foreclosed property. Here are some of the benefits that you could receive when buying a home that is in foreclosure, as well as the risk that are involved.
As Is Property
Since the bank is selling the home, instead of a homeowner, the property must be purchased as is. Therefore, you will want to have an inspection done prior to purchasing the property. Keep in mind that there are no warranties on a foreclosed home, so if the appliances do not work, or there is a stain on the carpet, you are responsible for those minor repairs. A home inspection will determine if there are major repairs and renovations that need to be done. If you choose to buy the property as is, you will inherit all of its issues.
Offer Acceptance Timeframe
When you submit an offer for a foreclosed home in Canada, the process may take a little longer. The bank's lawyers have to receive the offer first, review it, and then make a decision. However, if you are purchasing a foreclosure by judicial sale, the property is under the supervision of the court; therefore, all offers must be accepted by the court, which takes longer, in comparison to a traditional sale or a foreclosure by a power of sale.
On the plus side, banks do not like holding on to properties for long periods of time. After all, banks are banks, not property management companies. Therefore, if your offer is close to the asking price, the bank will likely sign it back, instead of rejecting the offer. Most banks accept the offer outright, unless the financial institution wants to keep the negotiations open.
One of the benefits to buying a foreclosed home is getting a bargain. While it is unrealistic to get a home for way below the market price, you can purchase a foreclosed home for a decent amount. The lender and owner of the home do not want to be sued, so both will make sure the property is sold for the right price. A professional appraiser will determine what is considered fair value pertaining to the home. However, property assessments do not have a lot to do with market value, which means it is possible to snatch up a home that is below market value. Banks only want to recoup what is owed on the property.
Great Properties to Choose From
This is one of the best benefits pertaining to buying a foreclosed home. These properties are not always old or in need of a lot of work; in fact, you can generally choose from starter homes to luxury properties that may require little, or no, repairs and upgrades. The previous owner was unable to keep up with the mortgage loan, which is why the property has been seized by the bank or the courts. Therefore, you will have various property types to choose from.
Since the price of foreclosed homes is typically offered at a lower rate than non-foreclosures, these properties attract more buyers. It is always a good idea to look at multiple properties, because the competition is steeper with foreclosed homes. The bidding wars for foreclosed homes could become tiresome, so you want to have other options to choose from.
Buying a foreclosed home in Canada can be a great deal, but there are risks involved. Do not let the discounted price be the deciding factor as to if you make the purchase. You will need to understand the advantages and disadvantages to buying a foreclosed home before making your final decision. It is always good to speak with an experienced real estate lawyer prior to making the purchase.