The hardships in the economy have resulted in an increase in available foreclosure and short sale opportunities. As a new homebuilder, Meridian Homes is trying to educate potential buyers about the pros and cons of distressed sales vs. a new home.
If you look hard enough, and are in the right place at the right time, a foreclosure or short sale may be the best option for your family, but at the same time, these homes could end up becoming an investment nightmare. It is important that homebuyers understand some of the disadvantages of buying a foreclosure, and short sale, so that they’re making the best buying decision.
Here are a few things to keep in mind when considering a foreclosure or short sale as your next family’s home.
- These homes do not come with a homebuilder warranty.
- A foreclosure may have liens that are not free and clear.
- The financial institution must approve a short sale and the approval process can take several months.
- These homes may be missing important items like wiring or pipes.
- When you purchase a foreclosure or short sale, it will decrease the value of homes in the surrounding area.
- It is not always apparent that a foreclosure or short sale has been looked after appropriately, does the home have hidden issues that may prove costly after you move-in to the home?
- Is there an unknown reason that has caused the previous owner to walk-away from the home?
- Repair costs may not be included in the loan and could easily become out-of-pocket expenses.
Consideration of all the issues above is vital when deciding on your next home. Buying a home is a long-term investment and all ownership costs, apparent or not, must be a part of the buying assessment. As with many new homes, Meridian Homes’ new homes come with a warranty and have been built to the highest industry standards, but more importantly, they come with piece of mind and a helping hand.
Foreclosures and short sales often cost less, but they do not always prove to offer long-term value.
Joel Gregory
V.P. Sales & Marketing
Meridian Homes USA, Inc
New Homes in Georgia and South Carolina
I’m interested in this comment:
‘When you purchase a foreclosure or short sale, it will decrease the value of homes in the surrounding area.’
Why should that be an issue? Is there backlash in the community for people who buy foreclosures? I could see how there might be some resentment toward people who buy foreclosures, although I imagine these buyers are actually doing the neighbors a favor by pulling one less vacant home off the block.
Tim Johnson
Most of the foreclosures are happening because of all the crazy financing and borrowing. Actually foreclosures are good, because they help to deflate the housing bubble, and the sooner this happens, the better.
The comment was meant to explain that if you buy a foreclosure or short sale for $250k in what was a $400k community it is unlikely that the other homes are still worth $400k. The more foreclosures and short sales in the area, the lower the value of the surrounding homes.
Thanks for your point Joel, now I got it better.
Another issue to point out is a less-than-desirable walk through before closing; there may be cases were a buyer doesn’t get a walk through at all. If the foreclosed home is new construction, there may be punch-out items still to be completed; the buyer would be responsible for these things.
You’ve made some good points that those thinking about buying foreclosures should think about. At the same time, those considering it really might find some good deals if they do some due diligence. Great stuff that many peole should make sure they think about. A full home inspection is certainly in order, no matter how good the deal is! If there are things wrong, the savings have to be weighed against what the TRUE costs are going to be. Good article!
there are lots of things to consider when looking for a new home, thanks for bringing up these points Joel
Good explanation…
It’s good to consider some points when you are ready to buy
Good post.But i've always wantted to build my own house, but foreclosure is a good investiment.
The repairs are something major to look into. A lot of research is necessary. Imagine walking into what you thought was a deal and them you find out you have to replace the roof. There goes all your money..you know.
Hi Joel, you’ve made some interesting points. I was thinking about getting a house that had been foreclosed on but I never gave half of these things any thought. Someone else bought the house and it turned out that there were issues with it that were unknown at the time of sale. You really have to give it a lot of thought before buying a foreclosed home.