The Pitfalls of Purchasing Foreclosed Homes

Buying foreclosed homes can be a very profitable venture or a good way for those just starting out to save money. There are some things that you need to be aware of however, before you take that step.

Initial Considerations

When you first start to consider purchasing foreclosed homes, you need to do your homework and make yourself aware of the condition of the home before you actually take the steps to buy it.

Among the potential problems, there may be issues with maintenance, taxes and other liabilities.

Potential Problems

To begin with, your house consists of several systems that are important to its overall health. These systems are:

  • Plumbing
  • Electrical
  • Heating
  • Roof
  • Structure
  • Sewage/Septic

There are other items, but the point is, that these repairs are extremely expensive depending on the severity of the problem. If all of these things were left without regular maintenance, then any repairs or replacements can run into many thousands of dollars, and if you buy without knowing, you will are left holding the bag. Your great deal on foreclosed homes has just potentially become a money pit.

For instance, if the furnace is outdated and needs replaced, this can lighten your pocket by $7000 or more. These costs add up very quickly. A problematic septic system will cost thousands to repair, and if it needs completely replaced, you are looking at a minimum of about $6,000. Structural problems if serious enough can cost 3 times that or more!

Property Liabilities

Again, if the homeowner could not the house payments, then it’s highly unlikely that the property taxes will need to be paid. The same holds true if there are any old water bills or anything like that owed to the municipality, or the county where the home is located.

The banks will generally take care of property taxes on foreclosed homes, but that may not always be the case, so it’s up to you to decipher everything that is going on with this property that you wish to buy.

Things you can do

You can do a lot to save yourself some money simply by hiring a home inspector before you jump into a huge investment that might cost you even more than you expected. The average price of a home inspection is around $300 but is well worth the cost if there are serious problems found that no one was aware of.

You have to take under consideration which is the lesser of the 2 evils – spending $300 to find out everything is fine (or not) or saving $300 only to find out you’ve just bought $20,000 in repairs.

The bottom line is that some careful research and the help of a few professionals can help you to ensure that the good deal you found on foreclosed homes is truly a good deal.