The truth about buying foreclosed property

In this market, buying a foreclosed house can seem like an amazing deal. But like with any bargain, there are some significant drawbacks that could have serious implications down the road.

Once they have researched various adjustable mortgage rates and secured a loan for a house, people looking to become first-time home buyers are currently seeing many bargain hunting opportunities available to them. One of the most attractive options for many people is on previously foreclosed homes. There are auctions on a daily basis where people can show up and bid on homes for a fraction of their original cost.

However, there are many issues when it comes to purchasing foreclosed homes including some concerns that mortgage lenders won't tell you about. One problem is with existing liens that might be attached to the house - either by the IRS, a state tax board or other creditors looking to collect money. When you buy a house at foreclosure, you are responsible for paying off all of these liens. If you aren't prepared to handle it, these can range in the tens or even hundreds of thousands of dollars.

Another potential issue is with the state of the home. A house that is in foreclosure because someone couldn't pay their 40 year mortgage rates might have sat abandoned for months or even years - this means that it could have all sorts of problems that need major attention. Or it might have been victimized by vandals or burglars who have done things like stealing copper wiring for resale.

If you prequalify for a home loan and are looking for a deal, one avenue to consider is with bank-owned properties. Unlike with foreclosed home, these properties are free from liens (which have been picked up by the bank). In addition, you have the ability to view and have a contractor inspect a bank property to make sure you are going into the deal with eyes wide open.

Thomas Wong is a freelance writer covering the real estate market. His work has been published in major print and online media outlets.