Whats the pros and cons of buying a house in foreclosure?
Question:
Answer:
I agree with the posters above. I would add one caution: check out the state laws. In some states, a family can still buy their home back even after it has been sold as a foreclosure.
You could get a potentially awesome house for a lot less. BUT you could also run into problems inregards to getting the financing or loan to close in a timley manner. I saw a friend wait for 4 months on the one she bought. So if you are not ina hurry, go for it. It takes a lot of patience.
Pro: you can get a bargain
Con: You take it "as is", no one is going to correct any defects you find out about, whether before or after Closing.
It used to be the pro was that the bank would sell the house for cheap, for the amount of the loan, just to dump it. They don't want the liablility. The con is that now with the option arm loans, they loan may be as much as 115 percent of the original loan. Top that off with stabilizing or dropping market values such as CA and it's not such a good deal. Most bank now, option arm loan or not, want the market value out of a house or maybe 5 percent less and that's not always such a good deal. Plus, why was it foreclosed? Mortgagor could not make their payments. What other payments couldn't they make? Property taxes come to mind. You could end up with quite a bill. Other liens on the property will be your responsibility, so unless you have a way to search public records or get a preliminary title report, you could have a mess on your hands. Usually the house is sold site unseen and if that is the case. it may be a complete dump! If they didn't make their payment, they could have given up completely and just wrecked the house knowing the bank was going to get it. Or you could get lucky, get a good deal, put some money into and flip it for a decent profit.
You have to wait for and seek out your own financing. In most cases, they say you have to be approved (not to be confused with pre-approved because 'pre-approved' just means that you should be able to get a loan while 'approved' means that you are financed and have signed all the necessary papers and have the check in your hand. Also you may not have the time to have the house inspected so you are virtually buying it as is.
On the plus side, you can find some awesome properties through foreclosure and get them for less than market as most finance companies/banks just what the balance and any fees incurred.
for california - pro- lots to choose from...
con- you need the cash amount to buy the home ex: 400,000 home means at the the trustee's sale you need to have 400,000 + in cashiers checks
pro- high potential for making a lot of money
con- you need to do a lot of research to make sure there are no outrageous tax liens on the property because if you buy it and the liens don't get paid, guess what Uncle Sam does... yup not your home anymore so make sure you do a thorough title search on the home and try to see it before purchasing the home to see what major repairs need to be done...
pro- it's fun
con- sometimes if not careful it can consume you.
pro- $$$$$$$$
con- losing$$$$ if you don't know what your doing.
hope that helps
More Related Questions & Answers...