Purchasing a foreclosed home can be enticing. Many foreclosed homes that are on the market are a bargain and could potentially get you into the neighborhood you desire. But is purchasing a foreclosed home the right choice for you? Here are a few pros and cons to consider before purchasing a foreclosed home in Michigan.
Pros of Purchasing a Foreclosed Home
Save money and build equity
Buying a foreclosed home under market value gives you the opportunity to build equity. Not only will you save money up front by purchasing a home under your budget, you will also be able to make home updates to increase value over time. Analyze different factors of the home as well, like the neighborhood and property value of the surrounding homes to get a better idea about the equity that could be built with the home.
Get in your desired neighborhood
If you have a dream neighborhood that you just can't currently afford, purchasing a foreclosed home in that neighborhood could be your ticket in. If during your home search you’ve come up empty handed, beginning to look at foreclosures could be a good next option.
Customize your home with a fixer upper project
If you’re looking to take on a fixer upper project, purchasing a foreclosed home could be a great option for you. Typically foreclosed homes are not in top condition and require some home repairs and cosmetic updates. Purchasing a foreclosed home could give you room in your budget to customize the home to your style.
Cons of Purchasing a Foreclosed Home
Potential hidden problems
Although the idea of a fixer upper may be appealing to some buyers, purchasing a foreclosed home could give you a lot more problems that you’d bargained for. If the home was foreclosed under stressful circumstances, the previous homeowners could have neglected major necessary repairs, or even worse deliberately jeopardized the functionality of the home. Before purchasing a foreclosed home, you need to do your research to ensure that you aren’t taking on a larger project that you originally planned for.
Burden of debt placed on your shoulders in the form of liens
When purchasing a foreclosed home, you could be taking on some of the previous owners debts. For example, if the foreclosed home has a new roof that the previous owner failed to pay for, there could be a lien on the home that legally requires the new owner to take on that debt. Before purchasing a foreclosed home you need to fully understand the liens that may be attached to the home's title so that you are not blindsided by additional expenses you weren’t prepared for.
Lengthy buying process
Purchasing a foreclosed home can take a lot longer than purchasing a general for sale home. When dealing with foreclosed homes, you are negotiating with a bank not a homeowner and their realtor so it can take weeks to hear back on your offer. Also depending on how complicated the previous situation was, there may be a lot more paperwork and details to work through. If you decide to move forward with purchasing a foreclosed home, you need to prepare for a longer waiting period.
Purchasing a foreclosed home has a lot of pros and cons. You need to evaluate your budget to ensure that you can take on the risk. The best way to know if taking on a foreclosure is a good option for you is to consult with your realtor. They will have the resources and knowledge necessary to help you make an educated decision.