Myths About Foreclosure
If the idea of purchasing your dream home at a foreclosure sale seems too good to be true...you might be right. Below, we’ll dispel a few foreclosure myths and make sure you’re primed and ready to get the best out of your foreclosure sale experience!
Myth #1: Foreclosures can only be paid for with cash.
While many foreclosures do require a cash-only payment, the process can also look remarkably similar to a traditional home sale, requiring a pre-approval from a lender. Although you are not always required to use the bank selling the home as your lender, direct courthouse sales will require you to do so. Depending on your Texas Hill Country county, you may also be required to pay instantly in the form of a certified check. If you are not required to pay instantly, you may be given a few days to deliver the funds, during which you can get a check from your mortgage lender.
Myth #2: Foreclosures are half-priced deals.
Common myth dictates that a foreclosed home will always sell for at least half of its original value...but the bank is still in the foreclosure game to make a profit. Although you are likely to save thousands of dollars on a foreclosure, the seller will still try to sell for the maximum possible price.
Myth #3: Foreclosures lose value more quickly.
Though foreclosed homes hold a negative stigma for being a “bad investment”, foreclosures actually tend to rise quickly in value. And while there's no guarantee that any home will increase in value, buying a foreclosure gives you a better chance than purchasing other homes. Why is this? Usually, foreclosures are sold below market value, providing instant equity to your home purchase. Any additional work you put into the home (new floors, tasteful paint, landscaping, and other improvements) will immediately increase the value.
Myth #4: Foreclosures cannot be inspected.
Many buyers believe that buying a foreclosure means forfeiting the right to a home inspection. This is not the case! If you’ve made the decision to buy a foreclosure, be sure the sales contract includes a contingency clause that requires a passing home inspection. Although the bank most likely WON’T pay to repair damages or defects, an inspection will provide the buyer with a full awareness of the state of the home. With full knowledge of the home’s condition, the buyer can either choose to accept these defects or back out of the contract. (Once again, the only exception involves a courthouse sale, in which case the home will be sold “as-is” with no inspection.)
Myth #5: Bad credit? Get financing from the bank that owns the property!
While some lenders may offer incentives to buyers who use their bank to buy the foreclosure, they aren't likely to bend their loan qualification rules...including credit standards. The bank is still responsible for a mortgage default, meaning they will try and protect their assets as much as any other bank. After all, why would they want to end up with the same property as a foreclosure again?
Understanding the reality of your purchase is the first (and arguably the most important) step towards buying a foreclosure. Let an expert Hill Country REALTOR® help you make the buying process as smooth and seamless as possible!