The risk in buying a foreclosure
Like any real estate transaction the more research you do and the more you know, the easier it will be not to make a huge mistake. The one thing to keep in mind is that you are the buyer not the Realtor and are not expected to know everything. Your agent who works at this full time doesn’t have all of the answers either but finding one who is knowledgeable that you can trust is one of the first things you should do before buying a foreclosure.
The most common concerns are, will the property continue to lose value after I buy it? It could just like any other home you buy. It all depends on the market. The thing to keep in mind is if you buy a foreclosure you are already buying it at a discounted price that is below the current market value. Keeping that in mind, what you do with the home will determine the outcome in the future. Meaning look at buying a foreclosure like you are accelerating the appreciation process over the next several years by getting the home at a discount in the first place. If you want to protect the value you must keep the home in good repair and continue to add upgrades that will be appealing to a buyer when you do decide to sell in the future. It sound simple but you would be surprised at how many buyers do not follow this simple advise.
Another concern I see a lot is that buying a foreclosure involves hidden risks. I believe this is true and it applies to any real estate transaction. Buying a foreclosure does involve a higher amount of risk, mostly due to how the home has been handled. I don’t mean the condition specifically, although that could be an issue. I am referring to all of the different companies that are involved throughout the entire process that affect the property. The biggest concern is the title work, you have to make sure that as the new owner you have clear title before you close on the home. This can be accomplished by having a title company that is representing you as the buyer. I would not advise that you use the title company that the bank uses to close the sale. they will tell you that it is cheaper and easier. perhaps that is true but is is safer for you? I don’t believe it is. Protect your self and your investment, get a title company and closer to do your side of the sale. In the state of Minnesota by law you have the right as a buyer to choose your own title company. Look into your states laws and consult an attorney if you have legal questions.
The other big concern is that just buying a foreclosure is really risky. To a certain degree it is but can be well worth the risk for the reward. The best thing you can do is hire an experienced agent to work on your behalf. That one thing alone can cut any risk you make take by a substancial margin.