3 Pitfalls To Avoid When Buying A Foreclosed Property In Calgary

Are you attracted to the idea of purchasing a foreclosed home? Maybe you have found a diamond in the rough that you can afford and cannot wait to jump on the opportunity to purchase it. If you are looking for an investment property, you will most likely look into buying a foreclosed property for their low costs. 

While these aspects can attract a buyer into considering a foreclosed home, the majority of these properties require a lot of work before you can turn it into a financial profit or your dream home. Understanding both the advantages and drawbacks of purchasing a foreclosed property allows you to make an informed decision about your purchase while being prepared for any surprise costs associated with the property.

Want to know more? Contact Our Calgary Realtors

Are You Prepared To Purchase A Foreclosure?

Why are foreclosure properties not as common and exciting as they are on TV? For starters, television tends to disproportionately focus on the exciting and dramatic aspects of the foreclosure process. These TV shows are also likely based in the US, where foreclosure opportunities are much more common. The Real Estate Act in Alberta operates quite differently from our neighbours down south, as our system is designed to prevent anyone from making a substantial profit at the expense of someone else.

While foreclosures can be great investments either to live in or re-sell, they often come with baggage. Be proactive, make sure you understand the foreclosure process, and prepare yourself financially and mentally for any extra costs that may come your way.
One of the best ways to ensure you are making the right choice when buying a foreclosed property is to hire an experienced realtor. If you are interested in purchasing a foreclosure as your new home or as a property investment, The Mel Star Team can help you find the perfect, most valuable home within your budget. 

Top 3 Pitfalls Of Buying A Foreclosure

Remember, the bank forecloses on a property because the previous owner was unable to make their mortgage payments. In these cases, the property is most likely in poor condition or not well maintained. Also, some people who are being forced out of their homes may take out their frustration on the property before the bank repossesses it. This could mean stealing appliances or even vandalizing the property. 

Here are some common problems you may encounter while purchasing a foreclosed property:

Poor Maintenance And Condition
Bank-owned properties can be left in disgusting conditions due to neglect from previous owners or because of time spent sitting empty. If a home is locked up with no adequate airflow, dirt may cause the entire house to smell. A small leak under the sink that has not been addressed could cause a mold problem, or a leak in the roof or burst pipe could result in major water damage. With no one around to fix these problems in a timely manner, they can quickly turn into expensive disasters. 

Problems With The Purchase
Despite all of the potential problems with the structure and maintenance of the house, foreclosures can still be profitable. However, you may come across other potential problems with the purchase that cannot be solved with a new paint job.

• No seller disclosures: Since no one from the bank has ever lived in the house or inspected it, they are unlikely to have any knowledge of the property and its potential issues. You will have to find out from your neighbours, your own inspection, or your experience after becoming a homeowner.
• Financing: Lenders will be less inclined to lend money to a homeowner for a property they consider inhabitable or that is appraised below the purchase price. If you are an investor paying cash, this will not be a problem.
• Competition: Because foreclosures can be great deals, there will be a lot of interested buyers. You will be up against experienced investors who will be most likely making cash offers to flip and sell the home for profit. Investors also make offers with little to no contingencies, which makes their offer much more attractive to the bank.

Slow Process
While you think a bank would be eager to get rid of a foreclosure property, the response time between the bank and the parties involved can be sluggish. Banks with a large number of foreclosure properties on their hands may take a long time to respond to your bid. If a bank is backlogged, it can take up to 90 days to hear back from them regarding your bid. 

Serious damage found in the home can result in a lower home appraisal, which may affect the buyer's ability to secure a loan in time before the property is sold to someone else. Foreclosures also require additional paperwork, which adds more delay to the process.

Contact The Foreclosure King Today!

The world of foreclosures can be very exciting and full of exciting opportunities. Being prepared for any pitfalls that may come your way during the foreclosure purchasing process will help ensure that you are not blindsided by any extra costs associated with the property. When buying from a bank, you will have to sharpen your bargaining skills and be prepared for a long, timely process.
Our team at The Mel Star has over 40 years of experience in Canada’s real estate industry. We know the stress and uncertainty that can come when buying a foreclosed home, and we help mitigate any risks by providing an all-inclusive, one-stop concierge service for all your home buying needs. 
 

FAQs

Q: Do I still need a real estate agent to purchase a foreclosure?
A: Technically no, but it is highly recommended to use the help of a real estate agent when buying a foreclosure. The process is different from buying a home on the regular market, and it can be challenging trying to negotiate with a bank. A real estate agent knows the foreclosure process in and out and can guide you through the process seamlessly while ensuring you do not make any costly mistakes. 

Q: Can I get a mortgage on a foreclosure?
A: Yes, you can. Keep in mind that other investors may be making cash offers, which will be more attractive to the banks.

Q: What is a foreclosure?
A: A foreclosure is the process of a lender (the bank) repossessing a home from a homeowner when they fail to make their mortgage payments.