Most people love a bargain — and in the Boston real estate world, great deals can sometimes be found in the form of a foreclosed home. Proponents of buying foreclosed homes love the reduced prices, but inexperienced buyers may find the risks outweigh the rewards.
A foreclosed home is a property that has undergone the foreclosure process, which was initiated because the borrower defaulted, or failed to make payments, on the mortgage, and did not take alternative steps such as a deed in lieu of foreclosure or loan modification.
Once the bank or lender takes possession of the property, it typically wants to unload it as quickly as possible, and often that can mean a significant discount for the next buyer. To recoup its investment, the lender will send the foreclosed home to auction, where it may be purchased by a buyer or investor.
— Competition less stiff
— Discounted prices
— Flipping opportunities
— Cash required
— Hidden issues, such as liens
— Sold as-is, often sight unseen
If you’re looking to save money when purchasing or investing in a property, a foreclosed home can be one way to score a deal — but only if you’re prepared to make an all-cash offer. If you have enough to pay for the home outright (rather than financing through a mortgage), you could purchase a property in an online or in-person auction for a steal.
There is less competition because all purchases require cash, which limits the potential buyer pool.
If you’re set on buying or investing in a foreclosed home, there are some drawbacks to keep in mind.
For one, foreclosures are generally sold as-is, with little to no inspection time, and many have been neglected. This can come into play if you’re planning to flip the home.
Overall, if you are new to investing or real estate, then it’s probably not the best way to break into the business, unless you love to learn through failure
If you’ve weighed the pros and cons and are ready to buy a foreclosed home, it’s important to first assess your level of risk.