Know Your Options When Buying a Foreclosure

Walk or drive through any neighborhood in Bethesda, Rock Creek Forest, or Rosemary Hills, and there’s a good chance you’ll see a home that’s in foreclosure. It’s sad for the families who’ve lost their house, but it’s also an opportunity for many buyers who otherwise could not afford to buy a home.

Many folks wonder whether foreclosures are safe to buy.  According to a recent article on Houselogic.com, there are two options for buying a foreclosure and each has its pros and cons.

1.    Buying at Auction

In this scenario, you bid on the home on the steps of a courthouse. Most experts consider this the riskier option mainly because you won’t be able to inspect the home before the auction to learn about potential issues.

• If the house has been empty for a while, there could be burst pipes, kicked-in walls, or rodents living in the house. You buy “as is.”
• If there’s a tenant in the house who doesn’t want to leave, you are responsible for the eviction process and all its potential costs.
• The title might not be clear or could have liens.
• The previous owner could file for a last-minute bankruptcy, which cancels the foreclosure and your purchase, even if you’ve already put down a cash deposit.

So while buying at auction can be a price bargain, it’s sometimes not worth all the headaches.  Generally only investors and house flippers will take on these challenges.

2.    Buying from a Bank

If a home doesn’t sell at auction, the bank takes ownership of the title and puts the home on the market for 20 to 30 percent above the minimum auction price. It also will hire a Realtor® to handle the sale. This is just like buying a non-foreclosed house, but the bank is the owner.

The potential problem for this option is lack of maintenance on the house. A bank might not have stayed on top of upkeep for the vacant house, and the former homeowners probably pulled out anything they could sell, including appliances. A lack of maintenance—as little as peeling paint—can make it harder to get a mortgage. So buyers have to do a lot of the fix-ups themselves.

The upside is that on average you’ll pay 20 percent less than for a non-foreclosed home.  And if a house is on the market, it generally has a clear title. However, you should still consult an attorney to make sure of this and be sure to get title insurance.

Knowing your options for buying a foreclosure can get you a great deal while helping you avoid some of the more expensive pitfalls.

Contact me, Mynor Herrera, today for expert help buying or selling in the DC, MD, & VA areas! I also specialize in Bethesda and Chevy Chase, as well as the sub-divisions of Rosemary Hills, Rock Creek Forest, East Bethesda & Whitehall Condominium.