Shopping for a deal is one thing, but the idea of buying a foreclosure is not suitable for everyone, and this article will examine the pro’s and con’s of buying a property that has been repossessed by a financial institution or competent authority. The truth is, in the current real estate market foreclosures are few and far between as banking policies change. Today, Bank’s in Canada do not want to repossess your property or foreclose on their clients. It gives them a bad reputation and it is a long, tedious and expensive process for the bank that just does not make sense.
The advantages of a foreclosure:
Price Point – As obvious as this may seem, foreclosures and repos are usually listed under market value. Your main advantage as a buyer is being able to benefit from a lower price point than what you are used to seeing. Beware however, this does not come with its own set of risks. Although purchasing at a lower price point allows for more room for renovations, profits or whatever you might be looking for, the only advantage of buying a foreclosure is that it will be cheaper than the average market listing.
The disadvantages of a foreclosure:
No Legal Warranty – When a bank or competent authority sells a property, they will never offer a legal warranty with the property as they are not able to properly declare any information to the market. This means that you are buying the property “as is” and must take it the way you see it. You will have no legal recourse for any surprises you find down the road.
Property Conditions – Although the price is more attractive buying a foreclosure means that you are purchasing a property from someone who just lost it due to incapability to make payments and keep up with the finances. Usually this means that the property is in poor condition, needing a lot of renovations and immediate attention which can be scary for a lot of buyers.
Lack of Information + Collaboration – When buying for a competent authority, there is no guarantee as to the accuracy of the information provided on the listing and the information available is usually very limited. This is because there is no home owner, only an authority mandated to liquidate an asset. They will not know the year of the roof, the windows or doors etc. You must be comfortable buying with limited information and have the knowledge necessary to make an informed decision.
As you can see, for the common buyer, the negative aspects definitely outway the positive aspects of a foreclosure unless you are someone who is ready and able to handle the negatives for the positive of price point!