First of all, a foreclosure is the procedure by which the mortgagee can collect a debt, if the debtor fails to meet its obligation to pay the installments. If the defaults are between three and six monthly deadlines, the bank initiates a foreclosure process in which not only claims those arrears, but the total amount of the whole credit, at an interest rate of between 20 and 25 percent as a penalty.
The debtor bears legal costs. When it is not possible to pay the stipulated in the execution, it is passed to the auction of the property. The apartment is removed, a process that lasts between six and eight months. This happens if the house is not a habitual residence. If it is, there can be a rehabilitation of the loan, only when the owner pays the precise receipts plus added expenses.
This has become one of the best ways to buy cheap houses, that offer real added value. Foreclosure homes are sold every day, all over the United States, either at auctions, by banks or by government agencies, anywhere from 30% to 60% less. When you’re buying this type of property, you are getting immediate capital on your purchase, because you can change and decide to sell the property right away, and for much more.
There are no high potential risks to worry about, just the opportunity to gain value over time. Whether you’re thinking of buying a new home for your family, or looking to earn extra money with a rental property, there’s nothing like foreclosed homes.
4 Important Things to Know Before Investing in a Foreclosure
To make a good investment, you have to take the necessary time, evaluating several options before making a decision. That is why we would like to share these useful tips, with everyone who’s interested. Ready? Let’s go.
Budgets Can Change Quick
In most cases, foreclosures are sold in the same way they were acquired by the bank, without any changes to their interior or exterior. If you plan to buy a foreclosed home, it is recommended that you offer a single purchase price, that will allow you to have a flexible budget for future home repairs.
Foreclosures can be vacant for a long time, which lies in the accumulation of taxes, these can be very expensive when making the appropriate repairs to the house. In this way, the price of a foreclosure can be misleading to an inexperienced buyer, because there may be additional costs that make the house worthless, and a bad investment for the future.
Make One, Two or Ten Inspections
Like when buying a home for the first time, pre-inspection is a fundamental requirement when investing in a foreclosure, we are talking about three characteristics, that may or may not make a foreclosure a good investment: The overall conditions, legal problems and the ability to finance. Be careful when making a deal without preparing all pertinent home inspections.
Be Prepared For What is Coming
When you buy a foreclosed property, you may not have the opportunity to inspect the interior. As a potential investor, you should assume the fact that the property is in poor conditions, and that you would need an emergency budget, in order to mitigate the damage and carry out the renovation.