Even though lake home foreclosures are not as common as other home foreclosures, if you stumble upon one, it could be a smart financial investment. While this may mean you can score a good deal on a home, it also comes with its own share of potential issues.
Several key factors should be considered when purchasing a foreclosed home. These include how the purchasing process will work and the potential downsides to buying a foreclosed home.
Types of Foreclosures
There are a few kinds of foreclosures you can buy. A pre-foreclosure home is one where the homeowner still owns the house, but is just a few weeks away from foreclosure. A real estate owned property is one where the bank or other lending institution has seized the home as an asset, and an auction home is one where the bank is selling the home to potential buyers.
Where to Find Foreclosures
When you are ready to buy a foreclosed home, you can start your search on the internet, looking for homes in a given area, or look through public records for foreclosed homes. Alternatively, you could also contact an agent to help you find foreclosed homes in your area. There is always the potential to find a great deal on a house at auction, but you will be bidding against others, and the competition can be fierce.
Dealing with Banks
The bank that holds the property will often ask for a pre-approval letter from your bank. This is to ensure you have the necessary funds and are able to make a purchase. As they have just had to foreclose on the property, they want to ensure that the same thing does not happen with your purchase.
On the downside, there are some things to keep in mind:
- You will not be dealing with the former homeowner at all in the process; only the bank, which is now trying to sell the home.
- You may feel rushed by the bank, which wants to sell the home and recoup its losses as soon as possible.
- You might also not hear back from the bank for a few days after you have made an offer, while they crunch the numbers of the offer. This can be frustrating if you want to move quickly.
Property Research and Ownership Liability
When purchasing a foreclosed home, there is no expectation of a disclosure of any issues with the house. You will need to do the research and legwork yourself, contacting the county or city planning department to request records and reviewing all the paperwork carefully. Or, you can hire a good title insurer to make sure your title is clear. You’ll need to rely on your agent to inform you about the schools in the area, when rush hour actually occurs, and what other things you should know about the neighborhood.
Depending on how angry the previous owners were about losing their home, you may find that they destroyed parts of the house on the way out, or they decided to take the fixtures with them as they left. Because there is no disclosure process, anything you find inside will be your responsibility to repair. You do have the right to have an inspection done, so you can at least be prepared for any hidden costs.
Buying a foreclosed home can be an adventure, but if you’re willing to put in the extra work, it can end up saving you a significant amount of money. Be sure to do your homework ahead of time and have your financing lined up, ready to go; you can be in your new home, lakeside or not, in short order.
This article was originally published on September 15, 2016.