What You Need to Know Before Buying a Foreclosed Home
by Kent Braaten
on Tuesday, June 16th, 2020 at 12:30pm.
Often having the most appealing listing prices, foreclosed homes for sale are some of the most popular properties on the market. Whether you’re a young couple interested in flipping or an experienced investor looking for new property to add to your portfolio, foreclosures are a great place to get started. But, while the price tags may be drool-worthy, there are some things to know before buying foreclosed homes that may have you reconsidering your appetite.
What Are Foreclosures?
First and foremost, the most important step to buying foreclosed property is understanding exactly what it is and how the listing price makes any sense at all.
Foreclosures are properties that the mortgage lender has taken possession of after the lender has fallen behind on payments and defaulted on their mortgage. At a loss from these missed monthly payments, the lender needs to try and recoup on the property and will turn to the real estate market to make that money back as quickly as possible. Motivated to have as quick of a sale as possible, they will typically list for slightly less than the market value to make it most appealing to buyers.
Your Guide to Buying Foreclosed Property
Even though it may sound like a sweet deal, buying foreclosed homes isn’t for everybody. If you think it might be for you, though, here’s what you need to know:
What You See Is What You Get
When looking at foreclosed homes for sale, one term you’ll likely see popping up again and again is “as-is”. This is just the simple way of saying, “What you see is what you get.”
While regular homes for sale in Saskatoon have actual owners as the sellers, foreclosed homes do not. They are lender-owned properties that don’t have the regular care and maintenance of a tenanted home. Often what this means is that the home is poorly maintained and will likely have quite a few essential repairs that will be needed before you can move-in and enjoy. And those repairs will be up to you as the potential buyer—you won’t see a lender stopping by in coveralls with a new toilet and spackle before possession day.
These necessary repairs won’t always be limited to regular maintenance, either. When a lender has to take back a home from an owner, you can imagine it’s usually not the happiest day of that person’s life. With all those emotions getting the best of them, it’s not uncommon to see trash left behind, possibly missing appliances, or even some vandalism left behind in the aftermath. And you guessed it—all that falls into “as-is”.
Always Get a Home Inspection
With the “as-is” rule in place, one of the most important things you can do before buying a foreclosed property is get a professional home inspection. These experienced home professionals will be able to tell you exactly what you could be walking into and the estimated costs you could be incurring in addition to the purchase price—including possible structural issues, wiring problems, and even hidden water damage. Nothing is worse than getting halfway through your flip only to discover hidden troubles that bring you far and above the budget you had in mind!
Know Your Comparables
What may seem like a good listing price could actually be a wolf in sheep’s clothing. And when buying a foreclosed home, you want to know that you are getting a good deal. That’s why, before getting started, it’s always a good idea to educate yourself on how comparable properties are performing in the Saskatoon real estate market today.
The best way to do that is to take a look at similar homes on the market in the local area, as well as those that have sold or expired! These will indicate trends of what is selling and what is not, so you can get a better idea of what should be expected with the properties you are considering. Of course, the world of comparative market analysis can be quite tricky to navigate and it’s okay if you don’t feel confident in your abilities to navigate it. That’s where the help of an experienced local real estate agent can come in handy.
Hire a REALTOR® Experienced in Foreclosures
As a buyer, working with a REALTOR® can be an invaluable way for you to get knowledgeable, professional advice that can help you get the best deal possible while safeguarding your investment. This is especially true when looking at foreclosures for sale. But not every real estate agent is created the same, and when searching the depths of repos for sale, you’ll want the help of a REALTOR® experienced in foreclosed homes.
This experienced agent will know what you need to keep your eyes out for and will be able to guide you on making a knowledgeable decision that best suits your needs. They will also usually keep a foreclosure list that they regularly update to keep you informed of the latest properties you’ll want to know about as soon as they hit the market!
Buying a foreclosed home can be an exciting and profitable venture! If done carelessly, though, it can also quickly become a costly mistake. But by educating yourself on what the process is like and working with a knowledgeable local REALTOR® experienced in foreclosures, you can be confident that you’re getting the best deal possible for your real estate investment!