Many buyers believe that buying a foreclosure is the best way to get a bargain price. But are foreclosures really a bargain?
Unlike a normal sale, bank-owned foreclosures are exempt from many of the required property disclosures because the bank never occupied the home. It is entirely up to the buyer to investigate the property and pay for all property inspections to determine the home’s condition. In addition to the more common property inspections, this could add the cost of electrical, plumbing, heat/air-conditioning and foundation or structural inspections.
Foreclosures are typically as-is sales. If, during the course of your investigations, you discover numerous, expensive repairs that you hadn’t planned for or don’t have the funds to complete, your option is to withdraw from the transaction without losing your earnest money deposit. However, the money you spent for the inspections – which can easily be $1,500 or more – isn’t refunded.
The true foreclosure “bargains” are typically homes in rough shape either cosmetically or structurally. If you are have vision and are able to see past the current condition, have a trusted contractor and have the funds to fix the home after you purchase it, you can definitely find a foreclosure bargain. This option isn’t just for buyers with lots of cash. The FHA Rehabilitation program provides the ability for FHA buyers to include the costs to purchase and renovate the home for 3.5% down payment.
© Wendy Cutrufelli, Contra Costa Real Estate Resource