Risks and Benefits of buying a foreclosed property

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Underlying riskd

Buying foreclosure property may give you great discounts; however, there are various underlying risks to it too.


Pre-foreclosure home owners want to sell their houses in a hurry to avoid foreclosure, which gives buyers the advantage to purchase at a lower price. Banks are also looking to sell these foreclosed houses in a hurry and in a cheaper price, because the longer they keep these houses the more it costs them to pay taxes. Houses being sold in a hurry give you the power to bargain at a lower price.
Foreclosure houses these days won’t be sold at a very steep discount price due to the mortgage crisis, and the potential for a bargain is still there.
Buyers can purchase foreclosed home cheaper and with just a few repairs and upgrades, they can appreciate the value of the property.
If you buy a real estate owned (REO) foreclosed properties, the title of the house can be cleared and you don’t have to assume back taxes of liens.


Yes, foreclosed houses can give you significant discounts, but there will be steep competition too. There are also other pre-foreclosure homeowners who want to pay off their taxes, mortgages and other balances, making them sell the house at an even higher price. Foreclosure houses might give you liens from balance that wasn’t paid off by the previous owner.
If you are planning to buy a foreclosed house at an auction, you may have to pay in cash and there is a possibility that you won’t be able to inspect the house before you buy it, which can be very risky.
Foreclosure houses might need extensive repair, because the previous owner may not have the funds to get it fixed. There are also instances when buyers have to start eviction process to get the previous owners out of the house, and this may costs legal fees. Buying foreclosed house from a lender may not only be time-consuming, but it involves a process filled with red tape.

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