Haven’t you learned that you never get something for nothing?
Foreclosed homes are typically sold well below market value – making them a great deal for buyers. However, they tend to need a lot of work – making them too much of a hassle for some buyers.
But why? What’s the story behind foreclosures? Why do they need so much TLC after you buy them?
- They’ve usually been vacant for awhile
Banks have never moved particularly fast when it comes to getting rid of foreclosures. In recent years, however, that has taken on a whole new meaning. In September, nearly 25% of the existing homes sold across the U.S. were foreclosures – and experts say there is a glut of foreclosed homes that haven’t even hit the market.
In fact, the banks are moving slower in 2012 than they did in 2011. One of the U.S.’ biggest lenders – Bank of America – takes an average of 6.7 months to sell a foreclosure, and the other big names are right in the same ballpark.
As a result, foreclosed homes sit empty for months on end.
That means no one is around to spot leaks, struggling appliances, and other small issues. These things go undetected until they turn into major problems – like when the home is full of mold, when the air conditioner gives out entirely, or when a pipe bursts and floods the place.
Unfortunately, a lot of problems go undetected during inspections, because the utilities have been shut off for so long. By turning the electricity, water, and gas on right before the inspection, everything can look fine – even if it’s not.
Vacant houses are also more susceptible to vandals – which is why they usually have copper wiring missing (a valuable commodity out on the resale market).
- Foreclosed homeowners may take out their frustration on the home itself
No one wants to hear that they have 30 days to leave their own home. However, that’s what millions of Americans have been told when their houses have been foreclosed on. It leaves them many of them feeling angry – angry enough to damage their house in “revenge”.
In fact, after the housing bubble burst, all kinds of horror stories started coming to light – like people pouring concrete down their drains, to stealing appliances, to smashing holes in walls, to ripping up floors, to having “Sharpie Parties” (where people invite their friends over and use permanent markers to scribble graffiti all over the walls).
Banks can sue homeowners for causing damage like this, but in many cases they don’t – simply because they know that if the homeowners don’t have the money to pay their mortgages, they won’t have the money to pay out a court judgment.
(Doing things like this is a crime, and homeowners can be prosecuted for it. However, that doesn’t help fix the house!)
- The bank has no incentive to maintain them
Let’s look at things from the bank’s perspective – they’ve already lost a ton of money on the property because the owner defaulted on the loan. Now, they’re stuck dealing with a house that’s going to sell for far less than what it’s worth. And, they’re going to sell it “as is” (meaning any problems are the buyer’s responsibility to fix).
When you look at it that way, why on earth would they bother putting any more money into the house to keep it looking nice?
Of course, it’s important to point out that not every foreclosure is an eyesore. Some foreclosures are in perfectly-fine condition and don’t require any kind of renovations before you move in and call them “home”. It’s all going to boil down to your specific situation. You may be able to find a foreclosure that’s in great condition, at a price you love. And, when all is said and done, that’s what many of today’s real estate dreams are made of!
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