During the last decade’s housing crisis, foreclosure numbers spiked drastically. As the economy and housing market has returned to normal, foreclosure numbers have dropped significantly. However, that doesn’t mean that foreclosures don’t happen across the U.S. Areas like St. Louis and Memphis struggle with foreclosures in particular. However, is it worth purchasing something like foreclosed St. Louis real estate? Foreclosures can still be seen popping up across the country, and buying a property that is foreclosed is still a viable option for some investors. The pressing question is whether or not buying foreclosed property is worth all of the hassle. Will it provide you any benefits or any drawbacks? What are the pros and cons of purchasing this type of property? Here’s whether or not you should buy foreclosed properties.
Pros
The biggest pro of purchasing a foreclosed home is the reduced price. Foreclosed homes are typically sold well below the market value, meaning that you should be able to snag it at a great discount. This means that you might be able to move into a neighborhood that you never thought you’d be able to afford simply by making a smart foreclosure purchase. While this doesn’t account for repair costs, it still can be helpful. Purchasing a home is extremely expensive, so getting good deals and discounts can be very helpful. A good deal on a foreclosure property could mean that you have to take less out in your mortgage, something that could save you even more in interest payments. A good foreclosure purchase could end up saving you several thousand dollars over several years. There is some risk involved in buying a foreclosed property at a real estate auction, so maximizing your benefits is going to have to revolve around minimizing the risk you face. Try to buy foreclosed houses that aren’t in run-down neighborhoods. Or, at least stick with homes that you’re relatively sure won’t have high repair costs. By mitigating the risk involved in purchasing the property, you significantly increase the chance that your investment in the property will be successful. Buying foreclosed properties can be very hit or miss — you just have to try to hit the jackpot as many times as possible.
Cons
There are many cons to buying foreclosed properties, and some of these cons can cost you thousands of dollars. The biggest drawback is the condition of foreclosed properties when purchased. These homes are frequently found in bad conditions and can lead to thousands of dollars in repair bills. This makes buying foreclosed properties at auction exceptionally risky since you can’t inspect the property beforehand. If you risk it on a foreclosure auction, you could be stuck with thousands of dollars of repair bills with no way out at all. In addition, you need to watch out for foreclosed houses in your area. Foreclosures in your neighborhood reduce the value of the surrounding area. People looking into the community will purchase the foreclosed home at a discounted rate, making it much harder for you to get the full market value out of your home. This means that if you purchase a foreclosed property in your neighborhood, then you could be inadvertently sabotaging your own property’s value.
The Decision
In the end, purchasing freshly foreclosed homes is a high risk-high reward move. You could be fortunate and score a bargain price on an amazing home. You could also have to put all of those savings and more back into the house for repairs. So what should you do? Instead of purchasing foreclosed homes, try to wait and buy them from the bank. These homes were homes that failed to sell at a foreclosure auction, and will likely still be sold at a discounted price. The catch is that you’ll be able to hire home inspectors to go through the home and check out the damages. The inspectors can then tell you how much repairs would cost, allowing you to estimate whether or not you’ll actually save money. After doing the calculations, you should be able to come to a definitive answer. This takes much of the risk out of buying foreclosed homes and can allow you to save a lot more money on your purchases.
