Benefits of Buying Foreclosures
Buying a foreclosure can seem like a gamble between winning the jackpot or ending up with a proverbial “money pit”. There are pros and cons to buying foreclosed homes. Let’s take a moment to look at some of the good things that come with making an investment in these homes.
The Benefits of Getting a Great Bargain
If you’re the type of person who loves to find a good bargain, enjoys telling everyone how little you spent on something that is normally expensive, or likes to have immediate turn around on your investments; buying a foreclosure may be the perfect route to home buying for you! With the housing market at it’s lowest point in the past several years, there are millions of homes in foreclosure, many of which are being sold at lower than market value.
Low Price
Foreclosed homes have mortgages that have defaulted, meaning the lenders are not receiving their money. These lenders now own these homes and they need to heat/cool, and maintain them (lawn care, trimming hedges), as well as pay the taxes and insurance. Mortgage companies and banks are in the business of financing homes, they are not interested in maintaining and/or selling homes. Therefore, they want to get rid of them as soon as possible. This is why foreclosed homes often sell for anywhere from 5% below, all the way to 50% below, their true market values. While you may not score a home for half the price, you should definitely be able to find one for thousands less than the market price.
Lower Closing Costs
We all know that closing costs can quickly add up and raise the original mortgage amount. When investing in foreclosures, you may be able to get a break for purchasing a home the bank wants to sell. Banks are anxious to sell these properties and therefore will often accept lower offers on down payments, closing costs, etc.
Profitability
Foreclosed home can be a wonderful way to make a profit. You can purchase the home at a good price, update it and make minor repairs, and sell it for the true market value. What a great deal!
If you are able to live in the property or rent it, you can afford to hold onto it until the market improves and make an even larger profit. You can also pay lower taxes on the profits if you’re able to either make the home your primary residence for two years, or hold onto the property as a rental investment for at least a year.
No Move-in Delays
Foreclosed homes are typically no longer occupied and are available immediately after you make the purchase.
Great Fixer Uppers
If you are looking for a house that you can make upgrades to, purchasing a foreclosed property can be a great deal. With a little TLC and repairs, you can turn it into a beautiful home.
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