Foreclosed properties typically sell for much less than properties on the traditional market, making them especially appealing to potential homebuyers on a budget. A blatant example of how one person’s misfortune can become someone else’s opportunity—foreclosed homes have proven to be a great investment for many a millennial who thought they’d never be able to own their own home. However, there are a few noteworthy things to be aware of before you take the plunge.
Foreclosed homes are diamonds in the rough. If you’re a wannabe real estate flipper, you might be unfazed by the possibility of spending years renovating a cheap fixer-upper. In fact, for many couples, home reno projects are a dream come true—and a chance to really bond as they settle into their new home. Many foreclosed homes—but not all—require a considerable amount of work. Unless you’re really ready to put in the blood, sweat and tears, you might want to reconsider.
The cost of your repairs might eat into your savings. Any real estate investor worth their salt will tell you the biggest mistake starry-eyed homeowners make when buying foreclosed properties is buying homes so unlivable that the cost to renovate them puts them in debt. Of course, since every home is different, your mileage may vary. If you find a foreclosed property in suitable living condition, it’s probably worth jumping on.
You should find a real estate agent experienced in foreclosures. While traditional agents can open doors for you in the conventional housing mark, if you’re looking for a foreclosure, specifically, you’ll need to narrow your search for a real estate professional who has expertise in securing foreclosure sales. Search for agents with specialized training in foreclosures and designations such as Certified Distressed Property Expert (CDPE).
Have your preapproval letter in hand before you make an offer. Just like if you were buying a home traditionally, you are expected to have a preapproval from your mortgage lender before you put in an offer, effectively indicating that you are serious about buying. Your mortgage lender will give you a preapproval letter only after receiving proof of your income and credit score. These properties go fast because of the bargain price, so you need to come prepared and able to make the offer.