ABC’s of Foreclosure – “As Is”

by Simon Lindsay on General

It can only be considered natural for home buyers and investors to consider the purchase of foreclosure properties. After all, these repossessed homes offer better return potential because of their relatively-cheaper selling prices. And with the large inventory of foreclosures for sale as well as continuing decline in home prices, it is not surprising that buyers are flocking to foreclosure auctions.

If you are also contemplating the purchase of a foreclosure home, whether for business or personal use, it is important that you understand that these distressed properties are sold “as is”.

Since foreclosure homes are repossessed by lenders due to mortgage default, you can assume that the original homeowner was experiencing financial difficulties and could not properly maintain the property. Thus, you can expect that most of these homes require some form of repair work.

Once the property has been foreclosed, you should not expect the mortgage lenders to repair or renovate the property because of the losses they have already incurred. Aside from the mortgage debt owed to them, they have also spent a considerable sum for the foreclosure filing.

Despite selling the property in its present condition, the lenders only base their asking prices on the loan amount owed them plus the foreclosure cost. Therefore, you can expect these foreclosure homes to be more affordable than most existing homes for sale.

Other lenders even offer more discounts and incentives because they are trying to avoid higher holding costs that include taxes and insurances. Aside from this, the tough competition in the market has created more reason for lenders to lower their list prices.

When buying foreclosure houses, you should always remember the “as is” condition of the property and have an idea how much it will cost you to make the property habitable. In this instance, hiring a professional inspector will give you a realistic estimate of how much you will need for repairs. With the repair costs in mind, make sure that you are still working within your budget.