Foreclosure Pitfalls to Avoid

Buying a foreclosed property can be an opportunity to purchase a property at a discounted price, but there are also several pitfalls to be aware of. Here are a few:

1. Condition of the Property: Foreclosed properties are often sold "as-is," meaning the buyer is responsible for any repairs or renovations needed. It's important to inspect the property thoroughly and budget for any necessary repairs. But most of the time, you won't be able to do even a tour of the property; leaving aside Inspection, the only thing you can make your assessment is on the disclosure statement provided by the auctioneer, if there is one.

2. Competition: Foreclosed properties can be highly competitive, with multiple buyers submitting offers. This can drive up the price and make it difficult to secure the property. Most of the time, you would have a Mix of Newbies trying their luck; an end-user homebuyer is a rarity, but are there too, and then there are the investors, so it's a way more competitive market than the regular purchase from the market.

3. Title Issues: Foreclosed properties may have title issues, such as liens or unpaid taxes, making it difficult to obtain financing or transfer ownership. It's important to conduct a thorough title search before purchasing.

4. Limited Disclosure: The seller of a foreclosed property may have limited knowledge about its history or condition, making it difficult to assess its true value. The auctioneer is not much concerned about the condition of the property, and all the assessment needs to be done by the buyer himself.

5. Financing Challenges: it's hard to get financing on foreclosed properties. Some lenders may be ready to provide financing, but even then, they have stricter requirements for financing a foreclosed property, such as a larger down payment or higher interest rates.

6. Unseen Costs: In addition to the purchase price, buyers may incur additional costs such as property taxes, homeowners' association fees, maintenance costs, and workmen liens, so you can get some unseen costs at a later stage which needs to be provisioned when you are buying a foreclosed house.

Working with a knowledgeable real estate agent and conducting due diligence is important to ensure that buying a foreclosed property is the right choice for you.