Buying a New Home vs. a Foreclosure
By Katherine Kerr Gleason
On the surface, buying a foreclosed home seems like a great idea. You can’t beat the price, they’re often only 2-3 years old, and they present an opportunity for buyers to acquire a larger home in a nicer neighborhood than they might otherwise be able to afford.
Then the ugly truth surfaces.
What most prospective buyers don’t know are the risks associated with the purchase of a foreclosed home. Here are just a few:
• Your financing options may be limited. If you are looking to finance your new home via an FHA loan, be advised that certain foreclosed homes do not meet the minimum standards for FHA financing. Homes missing ranges, flooring, and homes in need of major rehab will not qualify.
• Get ready to bring cash to closing. Not only are seller contributions limited (if there are any at all), but the property you’re looking at may be behind on taxes, HOA fees, etc.
• Don’t expect a warranty. That steal of a foreclosure comes AS-IS. Whatever problems the home has now, or in the future, are the new owner’s responsibility.
• Be prepared to get dirty. Once you’ve purchased that foreclosure from the bank, you get the chore of returning it to habitability. If you’ve never walked through a foreclosure property, you might be shocked at what this entails. We’ve seen bank-owned homes with missing appliances, flooring, A/C units, broken windows, missing doors, holes in the walls, stolen copper pipes, ripped up landscaping, pest infestation, and more. And this doesn’t include the smell.
• What you want doesn’t matter. The bank doesn’t care about your schedule. The bank doesn’t care about your title company preference. Be prepared to close when and where the bank tells you to. And be prepared for changes—the bank has no problems with moving up (or delaying) your dates.
• Surprise! Surprises at the closing table are never a pleasant experience, but it’s not unheard of for previously unknown issues with the property to pop up at closing.
So, what exactly makes your investment in a new home better?
• THIS HOUSE IS ALL YOURS! Why be stuck with what someone else liked? With a new Montalbano home, you pick the flooring, countertops, light fixtures, you name it. At Studio Montalbano, our design experts will help you create the home you’ve always wanted.
• THE WARRANTY. Every new Montalbano Home comes with a two-year builder and 10-year structural warranty. We stand behind the homes we build so you can purchase and move in with confidence.
• SELLER CONTRIBUTIONS. Builder incentives are available to help with closing costs or interest rate buy-downs. Why bring more money to closing than you have to?
• YOUR HOME IS READY. At Montalbano, you have TWO opportunities to walk your home in the days before closing to make sure that everything is as it should be.
At the end of the day, the choice is yours. But being armed with the right knowledge will help you make the decision that’s best for you and your family.
About the author
About The Author:
Katherine Kerr Gleason
Real Estate Marketing Expert
Montalbano Homes, a popular Arizona & Illinois home builder
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