Real Estate Experts to First Time Buyers: Stay Away from Foreclosures!

For the past years, the number of properties entering some stage of foreclosure has actually skyrocketed to record levels. In fact, there are literally millions of foreclosure homes for sale in the market today. Because of their relatively lower asking prices, buyers can not help but be attracted to what these goldmines offer.

But for many real estate experts, first time buyers do not possess sufficient knowledge about these repo homes to make a successful purchase. There are actually a lot of risks involved if they consider buying these homes. Some of the major risks include:

1. Seller Disclosure: first time buyers should know that sellers of foreclosure homes are not required to do due diligence. This means that they do not have to provide details about the property if not asked. This could be a problem especially if the buyer is not as experienced and thorough when it comes to inspecting the property or questioning the seller.
2. Bidding Wars: since most foreclosed homes are sold at foreclosure auctions, first time buyers might get into a bidding war, find themselves getting caught up in the excitement and overbid. Experts advise that buyers should be mentally-prepared for a bidding frenzy.
3. Eviction Problems: in some cases, the homeowner is still residing in the property and the buyer failed to clear this up before completing the sales transaction. In any case, it will certainly be an inconvenient situation.
4. Title Search: in a regular home sale transaction, a title search is done after the offer is accepted. But with a foreclosure home, buyers should do a title search before making an offer. If the buyer considers this is unnecessary, they may end up with a property with secondary liens attached to it.
5. “As is” Condition: first time buyers should remember that foreclosure homes are sold in their present condition. It is safe to assume that some of them might be neglected and even dilapidated. Worst, some homeowners may even damage the property deliberately.

With all these risks, first time buyers should be very careful about their decision to invest. But if they could successfully address each one, then they will surely reap the fruits of their hard work.

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• Foreclosure Investing: What to Look Out For