When making the decision to invest in real estate one of the best places to look in terms of value is in foreclosures. Economic downturns force more homes into foreclosure which create the perfect time for an investor looking to purchase property for private residence, rental or resale. Before taking that leap into investment it is important to do research and to understand that there are advantages as well as disadvantages to buying a foreclosure.

One of the biggest advantages to purchasing a foreclosed property is the low price. Most foreclosures sell for 5 - 10% below market value, although some may sell for as low as 50% below their true market value. Most homeowners find that they can make a significant profit by reselling a home that was purchased in foreclosure. Due to this profitability, foreclosures are excellent for building equity, renting, and even making a personal fortune through wise investments.

Banks and other lenders that sell foreclosed homes are usually in a hurry to sell. This creates more flexibility for the purchaser to negotiate financing options, down payments, closing costs, and other miscellaneous costs associated with home buying.

Finally, foreclosures are frequently vacant so the purchaser does not have to wait for previous owners to move out. Foreclosures that are immediately available for move-in eliminate delays that often happen with the purchase of a home.

Despite these advantages, many prospective homeowners will not consider purchasing a foreclosure. This is because there are many disadvantages associated with foreclosures.

Due to the economic hardship that forces a home into foreclosure, these homes may be in poor condition. The previous owner probably would not have been able to afford proper maintenance and necessary upkeep of the property. Significant repairs and renovation may be required with the purchase of a foreclosure.

Because foreclosed homes are sold as is, it is necessary for potential buyers to do more research. More paperwork is necessary and caution must be exercised due to the lack of guarantees.

Foreclosed properties may have liens or property title liabilities. These hassles can make the process of buying foreclosures more expensive and can increase the paperwork even more.

Finally, sometimes the former owners of a foreclosed property are in denial and refuse to leave the home. This can complicate and delay the move-in requiring eviction to be served.

Clearly there are both advantages and disadvantages to buying a foreclosed property. It is necessary for a potential buyer to understand these pros and cons and to perform research before making any offers. Under the proper conditions buying a foreclosed home can be a very profitable investment, but it can also prove to be more of a hassle than the initial low cost is worth.

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