Q: I was recently thinking about purchasing my first home and a friend of mine had used a mutual friend in the real estate business to look for foreclosure homes. I am just curious because they almost sound too good to be true.
A $300,000 home selling for $160,000. What is the catch?? What are your opinions on purchasing foreclosed homes? And why doesn’t everyone buy them if they are such a steal??
A: People don’t buy foreclosures because they’re tough to find in the neighborhood in which you might live (though this is getting easier as the recession worsens) and because they typically need a lot of work. When people run out of money, they first stop the maintenance on their homes. However, if you can get in and spot any BIG problems, i.e. cracks in the foundation greater than 1/8 inch, then you know what kind of deal you might be getting.
Also, foreclosures can take awhile to process, and you must go in with your financing already in place. Some people don’t like to deal with the negative emotional stuff that comes with a foreclosure. Obviously, someone else couldn’t make it work.
Aside from these issues, foreclosures can be a great way to get into a home with built-in equity.