Is a Foreclosed Home a Good Investment for First-Time Buyers?
Foreclosed homes are sometimes a good investment for buyers, because you can often get them for less than market value. But I'm not sure I would recommend foreclosure buying to a first-time home buyer. The process of purchasing a foreclosed home can be complicated and time-consuming. If you decide to pursue this, I would recommend hiring a real estate agent who is familiar with foreclosures.
Another thing to consider is where and how the home is going to be sold. Many foreclosure homes are sold through a real estate auction, because the lender wants to sell the property as quickly as possible. In such cases, you would need to pay for the home on the spot, during the auction. So you would need to have your financing taken care of going into the auction.
If the home does not sell through an auction, and the bank is essentially playing homeowner, you can make an offer directly to the bank for the purchase of the home. I know somebody who did this for a high-end custom home valued at around 600K. He offered around 400K, and the bank took it.
This ties into the second part of your question: "Will the buyer gain much equity in such a home?" In some cases yes, and in other cases no. It depends on (A) the current value of the home and (B) what you pay for the home. In the extreme example I mentioned above, the buyer walked into the house with instant equity -- and plenty of it. In other scenarios, buyers gain only a marginal amount of equity when buying a foreclosed home.
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Labels: Foreclosure Homes
posted by Brandon at
3:05 PM
