According to Handy, most homebuyers tend to purchase foreclosed properties since they tend to be cheaper than traditional properties in the same region. However, there are many other advantages that you can enjoy by opting to purchase foreclosed properties. Let’s look at a few of them so that you can make up your mind.
Here are a few benefits of purchasing foreclosed loans:
- They often come at a discount – You can purchase foreclosed properties well below the typical market value since they are often discounted by up to 20-50%. Part of the reason is that mortgage lenders want to recoup the loan balance on the property by selling it quickly and thus, want to attract multiple offers. Another reason is that foreclosed properties often remain in distressed conditions.
Still, if you want to purchase a home in a good neighborhood but you cannot afford traditional properties, you can purchase foreclosed homes since they offer a much better return on your investment.
- You can enjoy lower settlement costs – When purchasing any new property, high down payments are a serious hurdle. Traditionally, the down payment can range from 10-20 percent depending on various factors.
Fortunately, foreclosed properties can be purchased via regular mortgage financing too. Thus, if you purchase a foreclosed property directly from a bank, you can enjoy better deals due to their lower costs. In fact, you can negotiate lower closing costs and enjoy lower down payments too. Thus, they are a great option for investors that want to rent out properties.
- You can enjoy a faster closing process – In many cases, foreclosed properties tend to sell quicker than traditional properties since mortgage lenders want to retrieve the unpaid debt as quickly as possible.
Another reason is relatively less competition compared to traditionally listed properties. This is because most foreclosed properties are auctioned to cash bidders. Since most people don’t have the capability to purchase a new property without borrowed financing options, there is much less competition. However, this also offers an extra advantage to people who are serious about purchasing foreclosed properties for cheap.
- It helps to build equity – If you want to invest in real estate, you cannot go wrong with investing in foreclosed properties in a good neighborhood since you can purchase those properties well below the market rate.
Now, it is likely that you would have to perform some renovation and repair work since you have to purchase the property “as is” but it is also an opportunity to upgrade the property according to your liking. And, once the value of homes in the neighborhood increases due to development, you can flip the home at a higher price or just rent it out at a higher rate.
Handy suggests you do your due diligence before purchasing any foreclosed property. Although foreclosed homes can be an exciting real estate investment opportunity, you have to consider the cost of repair work needed and make your decision accordingly so that you don’t face any troubles in the future