The Hidden Costs of Buying a Foreclosure

by Janet Murray 02/23/2020

Image by Steve Heap from Shutterstock

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.

About the Author
Author

Janet Murray

Whether you're in the research phase just beginning of your real estate search or you know exactly what you're looking for, you'll benefit from having a real estate professional by your side. Let Janet Murray put her real estate experience to work for you.

A real estate broker since 2003 including 6 years in a management and marketing role, Janet has an extensive background in residential real estate sales and a skill set that is of great benefit to clients and colleagues alike.

Primarily serving the South Shore of Massachusetts (with the occasional trip North!), her philosophy is simple…she feels that working as a real estate professional is about much more than selling homes; it’s about making connections, building relationships, and working with clients and their families to fulfill real estate goals and dreams. She “loves going that extra mile to make each transaction a personal, positive, and memorable occasion!”

Professional affiliations include membership in the National Association of Realtors®, the Massachusetts Association of Realtors® serving on the board of directors, and locally, South Shore Realtors® where she serves as a 2019 vice-president to the board of directors.A firm believer in education and training, Janet has earned her GRI Designation (Graduate Realtor Institute), the designations of CBR® (Certified Buyer Representative), e-Pro®, and certified PSA® (Pricing Strategy Advisor).