Have you ever considered buying a house that’s for sale as a foreclosure? Homes are sold in foreclosure when the owner has defaulted on their mortgage. Therefore, the lender is selling the property with the aim of recovering the outstanding amount owing to them plus legal costs. Certainly, the price may be attractive but there are a few things that you need to be aware of. Here’s what I can tell you.
 

A foreclosed property is always sold in “as is” condition. Basically, this means that the lender will not guarantee anything about the condition of the house such as whether there are structural problems, mold or water damage. This is where you should have the home thoroughly inspected to identify any issues that may require major renovations. You’ll need expert advise about the building structure and roof, plumbing and wiring as well as the state of major appliances, furnace and hot water heater. Keep in mind that renovations may be extensive enough to result in a property reassessment and increased taxes.
Since the house hasn’t been lived in or maintained, don’t be surprized if it’s not very clean or has even been vandalized. It will be your responsibility to remove any furniture or belongings that have been left behind in addition to making whatever repairs are needed. You may also want to budget for professional cleaning.
 

Your Realtor can advise on the value of the home by looking at a number of factors. This includes the tax assessment history, how quickly houses are being sold in the neighbourhood and how much similar properties are selling for. CMHC data about foreclosures in the area may also be reviewed. Taking a look at these and other considerations that may influence the price is even more important when it comes to a foreclosure. With less information to go on than a typical house on the market and the unknows that come with renovations and repairs, weighing this additional information will definitely be helpful.
 

Before you make an offer, it’s a good idea to get pre-approved for a mortgage. You may find that you have to go to a few different financial institutions since some will be less likely to lend you money to purchase a foreclosed home.
While the listing price is generally below market value, there are a few things to keep in mind when you decide to make an offer. The bank or mortgage lender will want to sell the property as quickly as they can so that they’re relieved of the responsibility of looking after it. So, they may be a little more inclined than a homeowner to negotiate the price - meaning that you may walk away with an even better deal. On the other hand, if there’s considerable interest from other potential buyers and you’re really interested in the property, be prepared to bid a little higher than the list price.
 

If you’re ready to roll up your sleeves and invest some sweat equity, buying a foreclosed home can be a solid investment. Just make sure that you do your homework first. As always, I’m available and would love to assist you in your home search!