Blog | Investing
When Is It Actually a Good Idea to Buy a Foreclosed Home?

by | Dec 24, 2020

Buying A foreclosed home can be a good idea especially when it comes to real estate skip tracing investing. Bank-owned homes are quite numerous in today’s market and it’s painted like the best deal out there. At times you drive by a property, you admire it and then you see the ‘FORECLOSED” sign on it and you feel the universe has handed you a push. Here at Need To Skip, we are all about you making the best decision in real estate investment and we are here to demystify the convention that buying a foreclosed property is always a good idea (don’t worry, you’d thank us later!!). In simple terms, A foreclosed home is a home/property that has been put up for auction by a bank. This happens as a result of the homeowner defaulting in making mortgage payments to the bank. You can find foreclosed properties through any of the following means:

  • Pre-foreclosure: More popularly known as “short sale”. This is done by buying a home about to go into foreclosure from the owner. You might have the luck of buying the property for the remainder of the mortgage price or above it.
  • Real Estate Owned (REO) Property: When the bank fails to sell a foreclosed home at the auction, the property is now ‘real estate owned’ by the bank.
  • Auctions:  Then there are the actual foreclosure auctions that allow you buy properties in cash.

Why it is a good idea

The most common benefit that comes with buying a foreclosed home is that the property comes at a lower price than other houses in the area. Other benefits that comes with buying a foreclosed home are:

  • Opens up the opportunity for you to buy property in areas with better social benefits (such as school districts ) that you would have previously been unable to buy.
  • Minimal competition from traditional buyers due to an unwillingness to wait the extra time it takes to acquire a foreclosed home.
  • Another upside is that the cash requirement of foreclosure auctions might reduce the competition for the property.
  • There’s also the benefit of clean titles and paid back taxes and existing liens removed.

What to consider before buying a foreclosed home?

  • Buying as is: Purchasing a foreclosed home, especially at an auction doesn’t allow you to have a full appreciation of the defects or damages the property has. This is due to the fact that you’re not allowed to inspect a foreclosed property.
  • Unknown Repair costs: Since you can’t inspect the property, you might incur unfavorable repair costs in trying to make the property habitable/functional.
  • Squatters: You might have to deal with evicting squatters, drug addicts, pests and rodents on the property before you can occupy the property.
  • Delay in processing sales documents: banks are known for being tardy in processing foreclosure papers.
  • Seller report : Seller disclosure reports are not provided in foreclosures. Basically you might be buying a property ‘blindly’.

In general, buying foreclosed homes used with skip tracing are a good investment consideration. It is always wise to look beyond the norm and to weigh the pros and cons of buying such a foreclosed property.

Related Articles

How To Optimize Skip Tracing When Being An Investor

How To Optimize Skip Tracing When Being An Investor

How to optimize your skip tracing is an essential consideration for you as an investor. You want to be sure that your investment in Skip tracing is yielding much-needed results; and you are making the most out of the possibilities and advantages that skip tracing...

The Importance Of Skip Tracing To Property Investors

The Importance Of Skip Tracing To Property Investors

The importance of skip tracing to property investors can not get overstated. Skip Tracing is an essential consideration for any serious real estate investor as it has proven to be quite an unfair advantage in terms of getting results. To share more context, Imagine...

A Guide On Finding Someone That Owes You Money

A Guide On Finding Someone That Owes You Money

Finding someone that owes you money is a pain point that we have probably encountered at a point. Most times the people we lend money to are family and known associates and we don’t really need to call in the “coast guard” to find them or get our money from them....