Many buyers hear about all the great deals that people are getting on foreclosed homes, and they want in on the action. The problem is that there are downsides to everything.
Before making a rash decision to go out and buy a bank owned home, you need to first consider the pros and cons:
1. Getting A Home For Below Market Value – Who doesn’t want a deal, right?
2. Less Competition – A lower pool of buyers have the ability to finance and then put money into a home to fix it up. This could be a good opportunity for the right person, and especially critical as we head into a possible seller’s market.
3. Great Opportunity- A foreclosed home may be the only way for someone to afford a particular neighborhood or suburb.
4. Return On Investment – Buyers who buy a bank owned home and fix it up can end up with a large amount of immediate equity.
5. Alternative To Building – Building a home takes time and is not always a feasible option for everyone. Buying a bank owned home and fixing it up to your specific tastes allows you to get the end product that you want, without the cumbersome process of building.
1. Money - It takes money, sometimes a lot of it, to fix all needed repairs that are typical in a bank owned home.
2. Risk – Foreclosed homes don’t have property disclosures, so you don’t know what you are getting.
3. Neglect – Bank owned homes have been sitting vacant, sometimes for years. The lack of maintenance may lead to unanticipated problems down the road, some ending up to be costly.
4. Time Is Money – Buying a bank owned home often requires a huge investment of your valuable time. It can be like having a second job.
5. Financing – Some banks won’t lend on a home if it is not in decent condition. This would require a buyer to pay cash, or get a specialized construction loan, which is not always feasible.
The biggest problem we see is buyers jumping head first into buying a foreclosed home without giving it much thought. Many have heard success stories about people buying a bank owned home and assume they can easily do it too.
I have no doubt that a ton of people are successfully buying bank owned homes for 5%, 20%, or even 50% below market value. However, there are risks involved and they need to be considered.
Unless you have experience buying and fixing up homes, the process tends to catch most buyers off guard. They often fail to properly calculate the amount of money needed to improve the home, which can lead to their financial downfall. This is especially true for first-time buyers.
A bank owned home can be a fantastic opportunity to get the home of your dreams at a great price. You just need to consider the pros and cons to make sure it is the right thing for you.
The above information is compliments of The Schuman Team, Amy and Dan, of Howard Hanna Real Estate Services. They specialize is luxury homes, relocation, and first-time buyers.
They can be reached at 216-346-3235 or 216-403-9189 or via email, firstname.lastname@example.org or email@example.com.
The Schumans service the following Cleveland area suburbs: Aurora, Bainbridge, Bay Village, Beachwood, Bentleyville, Chagrin Falls, Cleveland Heights, Gates Mills, Highland Heights, Hunting Valley, Lakewood, Lyndhurst, Mayfield Heights, Mayfield Village, Moreland Hills, Oakwood Village, Orange, Pepper Pike, Shaker Heights, Solon, South Euclid, University Heights, Westlake, Woodmere.
Buying A Bank Owned Home – The Pros, Cons, and Reality is the property of The Schuman Team and may not be duplicated or used without their written consent.©March, 2013