Buying a Foreclosure – Pros and Cons
About 10 years ago it seemed that almost every home listing was either a short sale
or foreclosure. Fortunately, the US housing market has recovered and these
distressed properties are less common. Still, there are foreclosures or REO (real
estate owned) homes for sale and buyers who are searching for bargains tend to
be drawn to them. But are they really as good a deal as they seem? Before writing
that offer, consider the pros and cons of buying a foreclosure.
• The biggest pro is that they are cheaper, typically about 5-7% cheaper.
Banks do not want to hold onto property they’ve been forced to take back.
They want them sold and price them aggressively to get offers, normally
• The bank is impersonal. When negotiating, a bank will only consider the
dollar and cents of the deal; they are not emotionally involved.
• The biggest cons is the condition of the home. The previous sellers clearly
were in some kind of financial distress and chances are good there is
deferred maintenance or other problem with the home.
• The bank is impersonal. This can work against you as well. The bank does
not care who buys the home and will not be swayed with emotional
Buying a foreclosure can be a real deal or a real dud. Consider the pros and cons
carefully before investing in a foreclosure.