Foreclosures: Pros and Cons

For real estate investment, buying a foreclosure or a property that the bank has taken away from the owners because they had stopped paying the mortgage is usually a very good deal. You can end up getting a great deal for the property. There can be big financial rewards in such an investment. However, there are down sides too. These properties usually need a lot of hard work and so can be a headache for the new buyer.

Buying a Foreclosed Property

There are a number of reasons you might not want to buy a foreclosure. Firstly, you should remember that the previous owners were forced out because they could no longer pay for the property. That means that it is safe to assume that they would not have done the required maintenance work on the house for months. Also, they might trash the property deliberately when they get the orders to vacate the property. Foreclosures then sit for a long time and can be used for criminal activity.

You will face some specific problems that come with a foreclosed property. So, you will need to fix them properly before you move in yourself or rent it out.


The foreclosed homes are usually pretty dirty. They sit for months without any owners and so dirt accumulates. Also, vagrants may move in for short stints. The complete house can smell really badly.

As the previous owners were low on cash, there is a good chance that they have not repaired things that are in need of repairing. Also, they may have gone for the cheap options and done repairs by themselves. In this case, the repairs would not be proper.

There could be water damage from leaks or other problems. The bank may have cut off the electricity too.

One common thing that you might face is that the previous owners might have made non-permitted changes into the house. That means they did not get a proper permit from the state. This could give you a lot of headache in the future.


Pros and Cons of Foreclosure

As foreclosed properties sit for a long time, there might be acts of vandalism. Especially if it is a high crime area, the property might be trashed, windows broken and other such acts.

Removal of Items from the House:

The previous owners might have done this to get back at the bank. They could have removed some of the valuable items from the house like the closet doors, appliances, sinks, fixtures and copper pipes.


Find out about the neighborhood. If there is one foreclosure, there might be other foreclosures. Also, if that is the case then it might be a low-income area where people are not able to pay off their mortgages.

Purchasing Issues:

You might face some issues in buying the property. Firstly, the lender might refuse to lend you the money for a foreclosed home. Also, there will be no seller disclosures. You will have to find out yourself all the problems that the property might be having.


Buying a foreclosure can be a really good real estate investment. However you should have a clear idea about what you are getting into. If you can handle all the problems that come with it, then a foreclosed property will be an excellent investment for you.

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