Foreclosures make up a large segment of the housing market at this time, accounting for around 19% of total sales. This percentage is much higher in areas that went from boom to boost, such as in the states of Florida, California, and Arizona. According to Realtytrac.com, 1 in every 371 housing units received a foreclosure filing in September.
The question is posed. Does buying a foreclosed property save you money?
A market report from Zillow.com gave this example. "In the San Francisco market, where foreclosure re-sales made up 60% of transactions in December 2008, the median sale price for foreclosures was just 47% of the median sale price for non-foreclosures." Savings range widely depending on the area where you are buying, but Zillow.com reports that "foreclosures sell for approximately 28% less than non-foreclosures after controlling for differences in individual houses."
If you are looking to make an investment, however, you need to consider the market in which you are buying a foreclosure. A weak and ailing market could mean values will continue to fall. Buyers may be scarce. This is not an ideal environment for an investment.
Other issues must be taken into consideration, as well. The process of buying a foreclosure can take weeks longer than traditional negotiations. This is simply the nature of the beast. A foreclosure is a legal process. A foreclosure also means you must buy title insurance. According to CBS money watch, "A title search will pick up errors before you sign the check and protect you if something was overlooked.Â In the unlikely event that a former owner returns to challenge the foreclosure, the insurance company will defend you."
Foreclosed houses also warrant very close home inspections. There have been horror stories of new owners finding cement poured down drains by the disgruntled evicted. Be sure to see the house for yourself before you sign on the dotted line. And have a licensed professional carefully examine the home.
Even if the property hasn't been purposefully vandalized, many foreclosures need extensive repairs. A home may simply have been neglected and older homes require updates and normal upkeep. Budget carefully as you assess how much work the property will require.
If you take all of these matters into consideration, a foreclosed property may be the ideal buy for you.