Why does foreclosure make it a good time to buy a house?
Jun 27, 2009 in
Financial and Loan Tips
Nikki J
I read that there were approximately 1.6 million foreclosures in the US in 2006. Texas had the fourth largest foreclosure rate in the country. I am hearing that this is making it an excellent time to buy. I don’t understand why.
I read that there were approximately 1.6 million foreclosures in the US in 2006. Texas had the fourth largest foreclosure rate in the country. I am hearing that this is making it an excellent time to buy. I don’t understand why.
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6 comments
sanityisbeyondme on June 27, 2009 at 7:39 am
They usually sell the foreclosed houses for much less than what they are worth just to get rid of them fast and the banks no longer have to deal with them.
Tom on June 27, 2009 at 11:24 pm
Nikki, when a bank forecloses on a house, they just want to get rid of it and recoup whatever they can from the loan that was defaulted on. So, the bank will typically sell the house at an auction to the lowest bidder. Typically the selling price is MUCH cheaper than it would have been, had it been sold on the real estate market. Also, foreclosures in a neighborhood can drive down the prices of other houses sold in the typical way, which is one reason the rash of foreclosures hurts all home buyers, not just the unlucky ones losing their home.
litlbits22 on June 30, 2009 at 9:00 am
With a foreclosure, you can buy the house for the back taxes that the previous owners owe. (i think) But once a realtor buys the house, they will hike it way way way up. (i think)
i am not a realtor, so im not really sure how this works, but i think it may be how it works.
Mortgagemom on July 2, 2009 at 9:04 pm
The rate of foreclosures is driving down the market value of other homes in the same neighborhood. Every time a home sells it can become a “comparable” which is used to help determine value on an appraisal. So if a home in your neighborhood goes into foreclosure and is sold for less than market value, it drives down the value of the homes around it. That is why it is a good time to buy whether you’re looking at foreclosed homes or simply others homes currently up for sale. Another factors is that mortgage lending has tightened underwriting requirements making it more difficult for people to obtain financing. It’s a supply and demand issue – there are currently more homes on the market than qualified buyers, which also drives the prices of homes down. So if you’re a first time buyer, now is a GREAT time to buy since rates are low as well.
acermill on July 3, 2009 at 3:02 am
Nikki, in MY area we are not seeing foreclosures going for any hot deals. My experience with the lenders is that they have already taken a goodly kicking in the backside and are looking to get every penny they can out of these foreclosed properties. However, since so many of these properties are hitting the market right now, it is actually diluting selling prices in general by causing an oversupply of properties on the market.
In any event, if you decide to purchase a foreclosure, use good caution. These are nearly always sold ‘as is’ (buyer beware), so insure that you have the property inspected so that you know in advance what you are offering to purchase.
aichausa on July 3, 2009 at 5:22 pm
Should you decide to purchase a foreclosure, there is only one thing I can advise you and that is to hire an appraiser. This will be your “blueprint” as these homes are usually sold, as the previous respondent has stated, “as is”. Just cover your bases in a foreclosure situation.
Good luck to you.