Many first-time home buyers mistakenly equate the term "foreclosed property" as a great deal without regard to the circumstances which brought the foreclosed property to market. In most cases, they simply weren’t and aren’t “cheaper”. The list price may be less, but that doesn’t make them “cheaper”. It is advice to conduct your own diligence and try to look for everything that is wrong with the property—all the flaws, the broken items, the bad features. This process will help you minimize your risks and help you make an informed decision.
Foreclosed are sold "as is" or what you see is what you get. The banks won't make any repairs or renovations before selling the foreclosed property. Once you add the costs to repair, and the value of the time it takes to repair the property, you often eliminate the discount, if any.
Occasionally, foreclosed properties are in need of significant repairs or lots of renovations. It is very common you encounter in a foreclosed house its walls, ceilings, and paint may need refreshing or repair due to damage or neglect. The flooring usually needs cleaning or replacement. The windows and doors are broken or damaged. Lighting fixtures may need replacing or upgrading. Outlets and switches sometimes are not functioning and outdated. These are common reasons why lenders and banks sell for less those foreclosed houses or condos.
Foreclosed properties are for quick sale. It is considered non-performing assets because they don’t generate income for the bank. Homes that are vacant, can deteriorate over time, reducing their value. To avoid maintenance and ongoing cost like property taxes, home owners association dues and insurance the banks often price foreclosed properties below market value to attract buyers and sell quickly.
