Should you buy a Distressed Property?
Distressed homes are always sold “as-is,” which means you, the buyer, will be the one responsible for any repairs needed to get the house into shape. What is a con to buying distressed property? Distressed homes take more time and effort at virtually every stage of the process, require a large amount of paperwork and frequently need major repairs. How do you finance a distressed house? With a loan. In the wake of the housing crisis, banks have become more picky about who they will lend to.
If you need to move in and settle into a routine immediately, a distressed home might not be a good fit. You might also want to consider a vacation home, if you can afford it. If you can afford a larger house, and you’re looking to upgrade, you can probably get a good deal on a distressed home. Since the housing crisis, smaller homes have become much more popular than larger ones. What kind of house do you want? How financially stable are you? Buyers have begun to care more about energy efficiency and cost effectiveness than space. In the wake of the housing crisis, banks have become more picky about who they will lend to.
Do you need your house to be move-in ready? But keep in mind that foreclosures are emotional. If you can find a home with minimal cosmetic damage, this might not be a problem. Also, since foreclosed homeowners have limited financial resources, they might have let necessary improvements like a new roof or plumbing repairs fall by the wayside while trying to keep up with payments. So, be prepared to stay in a hotel, rent or live in chaos if extensive repairs are needed. Often, a homeowner has made huge financial and personal sacrifices to try to keep the house and ended up losing it anyway.
Even more frightening is the fact that houses at auction are usually purchased site unseen. Read on to learn when you should go for it, and when you shouldn’t, when it comes to distressed property purchases. How quickly do you need to move? Ask yourself the following questions to decide whether or not buying a distressed property makes sense for you and your family. But these houses won’t necessarily be dirt cheap. All distressed properties have the same basic advantages and disadvantages. Short sales in particular can take a long time to finalize.
The lender you buy the home from will also want to see that you’re financially stable, so they won’t be left in the lurch at the last minute by an unreliable buyer who backs out of a deal. But by asking yourself these questions, you should be able to decide whether or not the pros outweigh the cons for your lifestyle and financial situation. Distressed sales typically require the buyer to pay for expenses like closing costs, transfer taxes and even tax liens on the home. Deciding whether to buy a distressed property instead of a normal listing is complicated.
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