The Benefits of Buying a Foreclosed Home: What to Know

When it comes time to buying a home, you have many options. Will you choose a place in the city or the country? Are you interested in a single-family home or a duplex? Do you want a big back yard or a garage? What many would-be homeowners don’t consider, however, is the benefits of buying a foreclosed home. From lower costs to a huge appreciation potential, there are dozens of benefits of buying a foreclosed home.

What is a Foreclosed Home?

A foreclosed home is one on which the previous owner was unable to pay the balance of the loan back to the lender. While the lender has a few different options in this scenario, it frequently decides to reclaim ownership of the home (this is the foreclosure process), and then list it with a multiple listing service that allows people interested in purchasing the home to view it.

The Benefits of Buying a Foreclosed Home

While there are many benefits of buying a foreclosed home, the most prominent ones are as follows:

• Cheaper start-up cost. Foreclosed homes go on the market at a much lower price, which makes them easy for first-time homebuyers to purchase.
• Potential for appreciation. By purchasing a foreclosed home at a low price, the buyer gets to enjoy a large potential for appreciation.
• Bargaining potential. Banks don’t want to sit on foreclosed homes, and they’re often willing to make a deal with the right buyer.
• Ability to flip the home. Many people purchase foreclosed homes with the hope of “flipping” them and making money. This is a great idea for skilled and experienced buyers.

Should You Buy a Foreclosed Home?

While there are many benefits of buying a foreclosed home, there are some significant drawbacks, as well. These include paperwork, unpredictable damages to the home (foreclosed homes are all sold “as is”), and a high level of competition for foreclosed homes. For an experienced and confident buyer, however, buying a foreclosed home is a wonderful option with a high potential for cost savings and equity.