The real estate market and the state of the economy may seem to be making its way back to some form of stability, but no matter where you live, foreclosed homes can still be found tucked away in neighborhoods and beckoning new owners. At first glance at the price tag for some of those foreclosed properties, it is easy to assume that here lies the potential for a money-saving investment. However, it is all too easy to get yourself in a risky financial situation just by jumping on the sale of a foreclosed property too quickly. Here are three things you should consider before taking the chance
Title Searching Is an Absolute Necessity
If there is only one thing you do when you are considering putting your money down on a foreclosed home, make sure it is a title search on the property. Liens on the property can be lurking in a lot of places. If the home was foreclosed upon, there is a good chance the previous owner was in a bad spot financially, and therefore, there could be everything from contractor's liens to hidden mortgages involved. It is a good idea to have a real estate attorney take an investigative look into the home's history to ensure you are not obtaining any liens that will have to be paid if you make an investment.
Financing Opportunities May be Grim
Few people have enough money in the bank to just pay for a home straight out with cash and even if you do, this may not always be the most logical choice. Therefore, there is a good chance you will try to obtain some form of financing for the foreclosed home. Bear in mind that obtaining a loan on a foreclosed property can prove to be a trying ordeal. Many banks consider loans on foreclosed property risky business because normal inspections and assessments may not be a possibility due to as-is contingencies. Even if you do find an institution willing to finance, you could be faced with high interest costs, which can make your initial investment a lot higher in the end, meaning the property is much less cost effective.
Whether you are planning to invest in a foreclosed home for your own personal use or as a real estate investor looking to make a profit, you must be able to spot the difference between a logical financial investment and a possible landmine that will eat away at your money. Making sure you have a good real estate attorney on your side is a smart move regardless of your intentions after buying a foreclosed home.