The Hidden Costs of Buying a Foreclosure

by Debbie Goldberg 04/12/2020

An active housing market has reduced the number of foreclosed homes in inventory, but there will always be foreclosed homes available to purchase. Many buyers are not aware of what to expect when purchasing a foreclosure. Here are some home truths about buying a distressed home.

You’re not always getting a deal.

Many buyers believe foreclosed homes sell at rock-bottom prices. They expect massive and unrealistic discounts. While the bank may be willing to sell for well below the fair market value, their goal is to recover the loss they incurred when providing the original mortgage. Additionally, foreclosed properties may have long-standing maintenance issues that require a substantial investment to remedy.

The bank may not have the only lien.

A foreclosure removes the primary mortgage debt, but a distressed property may have other claims for money owed in back taxes, for mechanical work and contractors’ fees. A complete title search should tell you if there are liens that need satisfaction when you purchase a property. Your real estate agent can guide you in how to discover unsatisfied liens or judgments against the property

You may find maintenance problems.

Most owners do not simply move out of the property when they can no longer afford to make payments. When an original owner loses income, maintenance often becomes a low priority. And, if they have a medical disaster, a decline in health often means a decline in care for the property. Storm damage, pests, and other hidden issues mean damage to a home that gets overlooked when the owner has different priorities.

You may find vandal activity.

Although there are some stories of angry owners vandalizing the foreclosed property that they invested their life savings into, more often are issues with opportunistic thieves. They remove plumbing and light fixtures, paver stones, and other readily accessible objects from an abandoned property.

Schedule a thorough inspection before you purchase if possible so that you know what you're getting. Your real estate professional specializing in distressed properties can connect you with an unbiased inspector. They will report on your potential new home and help you uncover any hidden costs lurking there.

Buying A Foreclosure

Foreclosure

Hidden Costs

About the Author

Debbie Goldberg

I'm a full time Realtor with over 30 years of experience yet young enough to embrace today's ever-changing scope of marketing and technology. Having grown up in Connecticut and moved many times (too many to count!) I can empathize with today's buyers and sellers. Strictly maintaining ethical standards and being a fierce advocate on behalf of my clients are things I take very seriously. As a buyer, you can expect me to listen to and evaluate your real estate wants and needs. I can assist in explaining relevant forms, agreements, and closing procedures. I will guide you through the process of finding the right home, negotiating your offer, adhering to all contract dates and terms as well as final walk through and closing procedures. As a seller, I will listen to and evaluate your goals, needs, and timing in order to properly price your home to get the maximum exposure needed to attract the right buyers. In addition to negotiating on your behalf, I will make sure we communicate throughout the entire process as we navigate the contract terms, finance and inspection contingencies, as well as all closing procedures. I was born in Japan, grew up in Hamden and lived in New York, Ohio and Southern California before settling down in New Haven county to raise two kids, two dogs and a cat. I'm passionate about good food and love to bake. Some of my free time has been spent volunteering at Temple Beth Sholom, a synagogue where my family has been members for over 40 years. I also spend time at Tower One/Tower East, an assisted living center in New Haven where my mother-in-law now resides. 30 years of helping buyers and sellers achieve their goals has given me the peace of mind to know that what I do everyday matters. If you are thinking of buying or selling please keep me in mind.