Buying a house can be expensive, especially if you want to find your new home in a popular neighbourhood. This is why many future homeowners seek to tap into the foreclosure market. There are multiple reasons why a home goes into foreclosure. Usually, the owners have experienced a major lifestyle shift, such as loss of employment or unexpected illness. Whatever the reason for these homes for sale on the foreclosure list, they offer you the chance to get more home for your money.
How to Find Foreclosures in Your City
It can be hard to find foreclosed homes where you want to buy. A homeowner must default on their loan before the bank revokes the title. This typically happens after the homeowner has missed four or more payments, although this varies between banks and provinces. After foreclosure, the former owners have about 30 days to vacate the property.
After a home goes into foreclosure and the residents vacate, the lender typically tries to sell it. This most often starts through one of two legal processes. These are a judicial sale or power of sale. Then, the bank can work to sell the home on the real estate market or at auction.
This makes working with an experienced real estate agent the best way to find foreclosures in your city. A good agent is aware of all of the homes publicly and privately up for sale where you seek to buy. They can connect you with homes for sale better than just about anyone else. They also know of the second place where you can find foreclosures, auctions. All in all, your real estate agent is your best resource.
Pros and Cons of Buying Foreclosed Homes
To find foreclosures on your chosen market, first, find a great real estate agent in that market. Look specifically for one with experience in dealing with foreclosed properties. Then, talk to that agent about the hurdles you might expect to experience in trying to buy a foreclosure. They can help you avoid common pitfalls while taking advantage of low-cost homebuying benefits.
Below are some of the pros and cons of buying foreclosures.
Pros of Buying a Foreclosed Home
Benefits of buying a foreclosed home include:
- Lenders seek to sell these properties quickly to minimize their losses
- Banks will typically sell these homes for below market value
- You will not be responsible for past liens, taxes or mortgage payments still outstanding
- Foreclosures work well for people seeking to fix up a property as a rental
- Buying at a lower price enables you to use more of your money on renovations and upgrades
- You can resell the property on the standard market at a higher price to make a profit
Cons of Buying a Foreclosed Home
Drawbacks of buying a foreclosed home include:
- Foreclosed homes are typically only slightly cheaper than similar properties not in foreclosure
- Buyers typically buy these homes quickly, making it hard to find good deals
- Foreclosure home buying involves more procedures than for a typical home
- You are buying the home in “as is” condition, however the former owner left it
- You may have to haul away the former residents’ belongings if they are left behind
- You may face foundation, zoning or hydroelectricity problems with no warranties
- It can be hard to schedule a home viewing on foreclosed properties
- You must pay a land transfer tax of between one and three percent of the home cost
Are you ready to buy a foreclosed home?
Now that you know about the pros and cons of buying a foreclosed property, you must secure financing for one or prepare to pay cash out-of-pocket. This involves greater risk than when buying a typical home, made available on the real estate market. This foreclosure process requires being more prepared during your mortgage application process and ensuring you protect your own interests.
The best ways to protect yourself during a foreclosure purchase include:
Get Advice from Professionals
You should seek a financial advisor and real estate agent’s advice before, during, and after buying a foreclosed home. Make sure this decision is in your best interest. Do not just look at a lower price and jump quickly on board. Instead, get to know all of the costs and risks you might expect in going forward. Ask your advisors for their opinions about buying a particular foreclosed home and whether they consider the property purchase worthwhile.
Work with a Realtor
You can expect a more difficult process in buying a foreclosed home than buying one on the regular real estate market. This is why you need a qualified and experienced realtor on your side. They can help you find your ideal property and guide you through the buying process. You will face multiple steps, such as inspection and a court hearing.
Get the Property Inspected and Appraised Before Buying
As with any home you find for sale, whether foreclosed or on the standard real estate market, you need to get the property inspected and appraised before agreeing to buy it. Do not rely solely on the lender’s inspection and appraisal. You need one from a third party, as well. You will have to pay for this out of pocket, but it will give you peace of mind regarding your purchase. It can also keep you from buying a property that has more problems than it is worth.
Develop a Budget Before Buying a Foreclosed Home
Before buying a foreclosed home:
- Consider all of the associated costs
- Create a budget to have a clear image of what you can afford and which costs to expect
- Ask for your real estate agent and financial advisor’s input on this document to ensure you do not miss any items. You should also bear in mind that buying a foreclosure can mean you have work to do before living in the property
Regardless of whether you ultimately find a foreclosure and make that property your home or choose to purchase a non-foreclosed home, you will appreciate having seen more of the available options on the market. Your real estate agent should be quite happy to guide you through this process. They can also help you find unlisted and foreclosed properties you cannot otherwise find on your own.October 19, 2020