With current market conditions spurring foreclosures, it only makes sense that home buyers would want to take advantage of housing prices well under market value. But what’s the deal? Is this idea way too good to be true? Does buying a home that’s been foreclosed on make you a Good Investor or a Risky Riskerton?

Proceed With Caution

Unfortunately, there are both big benefits and drawbacks. And while the middle road isn’t always the most compelling one, you can’t help but throw down the ‘slippery when wet’ sign here. So long as you’re prepared for the plentiful potential snafus that accompany a foreclosed home, you’ll protect yourself from skating across the supermarket floor on your back.

Twofer Temptation

First, let’s talk about why foreclosures are so affordable. In most cases, a homeowner can no longer make the mortgage payment on their home and they’re forced to give their home back to the bank. The bank or the lender that has taken control of the home wants to recover as much of its investment as possible, and quickly. That’s why foreclosed homes are often sold at prices that have been reduced by as much as 30% or more. While the premise is bittersweet, this is an excellent opportunity for buyers looking for bargains. Now that down payment assistance is no longer available and loan limits have dropped on FHA products, this seems a timely alternative to making buying a home easier.

Avoid Making This Your First

If you’re a first-time home buyer, avoid making a foreclosed home your first purchase. Or, if the price is right on a home you’re hung up on, at least try to make yourself as familiar as possible with the home buying process as well as the possibility of disrepair that comes along with moving into a foreclosed home. For instance, for newlyweds looking for their first collaborative shelter to launch their relationship, foreclosures may not be the best choice. Why? Because foreclosures can be a vehicle for challenge. And chances are, if you’re just learning to adjust to the smell of your spouse’s socks, you don’t want to have to adjust to a barrage of surprise electrical, plumbing and roofing problems while you’re at it.

Get an Agent Experienced in Foreclosures

A good real estate agent can tip you off to the challenges you could run into, keep you in tune with housing prices in surrounding areas, and tip you off to opportunities that you wouldn’t otherwise be aware of. Additionally, some sellers require that buyers are represented by an agent, particularly in a foreclosure situation.

Buff Up Your Credit Score

Check your credit report. Make sure you score is in good shape. Banks and lenders are particularly sensitive to credit issues in foreclosure situations.

Slippery When Wet

Write down your budget for repairs after purchase. Now double it. As a safeguard, that’s about what you should prepare to spend on repairs in a foreclosed home. Depending on how long the house has been unoccupied, or on whether the homeowner was able to perform routine maintenance on the home, you should prepare yourself for the worst so you don’t face unwelcome surprises. In some cases, it’s difficult to get access to a foreclosure before the sale of the home.

The bottom line? Work with an experienced agent, shop around, and proceed with caution. Don’t let any unwelcome surprises take away from a great opportunity to get into a home you love.

Related Info

• Get a pre-screened, experienced real estate agent you can trust.
• FHA Loans are more popular than ever. Get yours through a leading retail lender of FHA Loans.

Related posts:

1. Things to know when buying a foreclosed property
2. Are Foreclosed Homes Cheaper to Buy?
3. Buying a Home is Free-er Than You Think

Tags: FHA, FHA Loan, FHA Loans, First-Time Home Buyer, Foreclosure, Foreclosures, Home Buyers, Home Buying, Home Purchasing, Housing Prices, Quicken Loans