Are you looking for a good deal on a house?short sales or foreclosures are considered distressed properties) can be a good deal, not everyone qualifies to buy one or should buy a distressed home... for a number of reasons.
Here are the three primary reasons many buyers need to skip over foreclosures and short sale properties in their home search:
- Your type of financing may restrict the condition of the home.
- You may not have the cash on hand to afford the upfront purchase expenses.
- You may not have the trade skills or handyman skill to fix a home up.
Let's talk a bit more about condition.
If you are getting a government insured loan, like FHA, VA or USDA, the home needs to be in habitable condition. An appraiser will be looking for safety concerns and major repairs and if they find any issues, correcting them will be a condition of the loan. Most of the time, the sellers won't correct these problems if they haven't already done so before a buyer made the offer.
Cash on hand.
In addition to the appraisal and other typical upfront buyer expenses, distressed properties often require more cash on hand for the buyer. Especially if you are buying a foreclosure through an auction, you often have bidding offer fees or "technology fees" upfront. Also, the real estate fees that commonly fall on the seller in a real estate transaction are often passed on the buyer as an upfront expense. Make sure you know any potentially hidden costs and have a little cushion in your budget if you are shopping foreclosures and short sale properties.
Repair and renovation skills.
Yes, most people can change light bulbs and often the average handyperson can even replace a sink faucet, paint the walls and change out light fixtures. Calling a flooring company is pretty easy to accomplish as well. The deeper concerns lie in what is lurking in the basement (mold, foundation problems, etc) or in the outdated electrical box. These repairs and updates will require professionals and permits to cure. Those expenses can add up quickly!