Q: What is a foreclosed property?
A: A foreclosed property is a house, condo, apartment or another property type whose owner failed to pay their mortgage, and hence defaulted their loan scheme. This results in the lender taking possession of the property who can force a sale of the asset to recover some of the money.
Q: Is it then advisable to buy these properties?
A: Real estate experts agree that foreclosed properties can be a great investment. The primary reason to consider purchasing a foreclosure is the chance of getting a great deal. The individual lender or the bank who has repossessed the property may not want to hold on to the asset and let go at a very low price.
Besides the affordability factor, there are other important aspects of foreclosed properties that are worth thinking about:
Lower down payment and lower amortization
You can get a foreclosed property that comes at incredibly low down payments. Especially if you are buying a home at any designated property auction, you can get offers for as low as 5% down payments. Yet, higher down payments may be worth considering, as they provide you with higher equity on your property.
In addition to that, if you snatch a foreclosed property with a longer payment plan, you are likely to end up with lower monthly amortization. This will especially come in handy if you lease out your property. Chances are, you will be making a small profit every month after mortgage payments.
Possibility of financial gain
The biggest advantage of buying a foreclosure is the possibility of selling your property for a measurable profit if you have bought it much lower than the market rate.
Because these properties were considered collateral by the banks or any other lenders, the property has undergone inspection and careful review. Hence, the property can be considered free of disputes or other legal complications. It should be a clean buy for anyone.