Risks of Buying a Foreclosed Property | Journey Home Lending

Foreclosed properties provide plenty of potential benefits for buyers, starting with the possibility they’ll get an incredible deal on a great piece of real estate.

The lure of getting a bargain is enough to entice plenty of buyers foreclosed properties, which is great, particularly for those who might otherwise not be able to afford such a home. However, if you’re considering purchasing a foreclosed property, there are a few risks beyond those that are part of the standard homebuying process that you should keep in mind:

  • A money pit. Most properties in foreclosure require some work that may range from the simply cosmetic to major structural repairs. Many foreclosure properties sit vacant for months before a homeowner actually gets the keys, which means maintenance already deferred has time to get worse. Additionally, vandals both human and animal may have done damage to the structure while it was empty.

  • Mortgage hurdles. Particularly in purchases using special mortgages meant to help first-time buyers, older buyers and other select groups, there can be additional requirements you’ll have to meet before the loan is approved. Most of these are meant to protect either the lender, you or both.

  • Potential closing delays. As you work through the process with your lender and the one selling the property, there could be delays from that latter institution as it works to ensure it gets the most value from the property possible. In extreme cases, that can add months to the timeline.

  • Hidden fees. Foreclosed properties sometimes bring nasty surprises beyond unseen damage and animals in the attic. Buyers may be on the hook for additional transaction costs, such as transfer taxes and foreclosure company fees. Beyond that, if there are liens against the property beyond the primary mortgage, those typically have to be paid before the title is considered clean. Alternatively, a quiet title action could help clear those.

Journey Home Lending is ready and able to help you through the home purchase financing process, no matter what type of property you decide to purchase. If you’re ready to get started, reach out today!