Currently, foreclosed properties are on the rise. A complicated foreclosure market can provide ample opportunity for educated buyers, or leave room for devastating financial flops when a property is purchased without a thorough home inspection or sufficient knowledge.
“While some foreclosed homes can be a real steal, make sure to do your homework first,” says Connie Ray, President/Owner of Coldwell Banker Platinum Partners.
When looking at foreclosed properties, buyers should be aware of three different types of foreclosures, and the risks or benefits that come with each.
Real Estate Owned (REO). These homes have been foreclosed and are now owned by the bank. They have often stood vacant for some time and typically have maintenance problems due to neglect, so buyers should be extra cautious.
“REO properties are often sold ‘as is,’ leaving the buyer some wiggle room to request a price reduction based on needed maintenance. If you have the finances, time, and energy for a fixer-upper, REO properties can be a great investment,” Ray notes.
Short-sales. These are pre-foreclosed properties that are typically being sold at a lower price so that the seller doesn’t have to foreclose. Designed to create an ideal situation for all involved parties, short-sales can offer great deals for the seller, buyer and bank.
“If you are looking into a short-sale property, be sure you are pre-approved for a loan,” cautions Ray. “Also, make sure to have a solid home inspection done.”
Auctions. An auctioned home is one of the riskier types of foreclosed property purchases, as he buyer often has a limited window of time to view the property, and no opportunity for a proper home inspection.
“These ‘as-is’ properties can be a great deal for the seasoned real estate investor who knows what to look for. If you’re new to the field, purchasing a foreclosed home at an auction could be devastating financially when major unseen problems arise,” warns Ray.
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