Buying a house in the middle of a pandemic can be tricky due to the unstable economy. If you’re keen on getting a new home and have the financial capability to do so, then you might consider buying a foreclosed home.
This may not seem like a good idea at first. For instance, foreclosed homes are often sold on an “as is” basis. They may not be in their best condition. And several repairs or even major renovations may be needed. But that doesn’t mean they’re not a worthy investment.
The pandemic has increased the demand for newly built houses, especially in areas with low population density. And because of this high demand, the supply of newly built homes is running low. The competition is high, which means prices for new homes are going up.
In this situation, going for a foreclosed home may be a more practical choice. Here are some reasons why you should invest in a foreclosed property:
You’ll get a great deal if you buy a foreclosed home, especially if it’s a real estate owned property or owned by a bank or a government entity. In particular, banks have many foreclosed properties, so they would want to sell as quickly as possible to get back their money. Thus, they offer foreclosed homes at lower prices compared to the homes’ appraised value. Also, the pandemic has driven mortgage rates to an all-time low. Low mortgage rates mean lower amortisation. The combination of lower prices and lower mortgage rates makes foreclosed homes a reasonable bargain.
You may argue that foreclosed homes often require some extra TLC. And you’re not wrong. Not every aspect of a preowned home will be perfect when you acquire it, so you’ll have to do some repairs or renovate, which can be pricey.
Luckily, the internet offers many DIY tutorials that are easy to follow, even for absolute beginners. So instead of hiring someone to do simple repairs or improvements, such as painting walls or replacing faucets, you can do them on your own. Or you can ask for help from a family member or friend.
Most foreclosed homes are owned by banks. And since you’ll be directly transacting with them when you buy, the process will be significantly quicker than the traditional process. Also, banks are generally reputable organisations, so you get the assurance that your transaction will be legitimate.
Meanwhile, if you decide to buy from a private individual whose home is at pre-foreclosure status, the buyer will most likely be eager to close the sale as quickly as possible, given their need for money.
Ready for Occupancy
Another perk of buying a foreclosed home is that it’s ready for occupancy. So if you’re in a hurry to move out of your current residence, buying a foreclosed property is your best bet.
As previously mentioned, many foreclosed homes are sold on an “as is” basis. But this doesn’t always mean that they are very run-down and uninhabitable. If you do intensive research online or consult residential conveyancing lawyers, you’ll find many properties in the market that are in good condition. There may be some cosmetic repairs needed, but minimal. As such, you can move in as soon as you close the deal.
If you choose to buy from a private individual, they are highly motivated to let go of their property. They might add a few perks to their property to convince you to close the deal and move in immediately. For instance, some sellers might leave some pieces of furniture behind.
Potential for Equity in the Long Run
Since you’re buying at a low price, a foreclosed home has a great potential for equity accumulation. Home improvements and renovation can improve the overall aesthetic and quality of your home. These will make the house more attractive to potential buyers if you ever decide to resell. Real estate equity may also increase if your neighbourhood develops.
Buying any real estate, whether new or not, comes with risks. Buying new has disadvantages, too. New houses come with a hefty price tag. They are also mostly built in new subdivisions that don’t have developed landscaping, so the environment may not be desirable. Meanwhile, purchasing a foreclosed home comes with its own issues as well, such as maintenance concerns.
If you need a new home right now and weigh your options carefully, you’ll find that a foreclosed home can be a worthy investment over a newly built home due to its low price and good equity potential.