It’s an unfortunate result of the recession — many families haven’t been able to keep up with their mortgage payments and have lost their homes to foreclosure. And foreclosed homes often sell for less than market rates, making them seem like a bargain to buyers who are used to the inflated prices of a few years ago.
But comparing a new home to a foreclosure on price alone is a mistake. You can’t put a dollar value on your peace of mind, safety, financial reserves and time — all of which could be in jeopardy if you buy a foreclosed home.
For example, a foreclosure could have legal issues. Before buying a foreclosed home you will have to do thorough research — or hire a title company or lawyer — to make sure there aren’t any additional financial or legal liabilities attached to the home. There may be liens on the property for unpaid taxes, home owners’ association dues, or the home may have been put up as collateral on other loans that weren’t paid. You could become liable for thousands of dollars of debt you weren’t aware were attached to the foreclosed home.
As soon as you take ownership of a foreclosed home, anything that breaks or any problems that arise are your responsibility. This could cost you lots of time and money that you may not have budgeted for.
With a new home, maintenance won’t be an issue for a while with the brand new appliances and systems. And if something does go wrong in the first year, there is often a new home warranty that guarantees repair or replacement.
Foreclosed homes also often haven’t been taken care of by former owners who knew they were going to lose the home. In some cases vandals, thieves or even the owners have damaged the home, removed appliances or torn apart walls to remove copper pipes that are valuable as scrap metal.
A foreclosed home could have been sitting vacant for months or years, and if it wasn’t properly secured, there could be significant damage from water, mold, weather or pest infestations. It could cost you thousands of dollars and a lot of time to bring a home that was allowed to deteriorate back to a livable condition.
You also don’t have to spend time or money changing someone else’s design preferences with a new home. No tearing down wood paneling, repainting walls, or replacing outdated flooring. Your preferences are included as the home is built, and they are there waiting for you the day you unpack your boxes.
Finally — and most importantly — don’t forget safety.
New homes have been constructed under a strict set of codes and standards, and have to be thoroughly inspected before the certificate of occupancy is issued and you are allowed to close the sale and move in.
With a foreclosure, you don’t know how many renovations or repairs have been made over the years, or who made them. There could be faulty wiring, weakened structures, or other conditions that could be dangerous and costly to bring up to safe and modern standards.
When you are looking for a place to keep your family safe and to build a lifetime of memories, it may be well worth paying a slightly higher upfront cost to get convenience, modern features and peace of mind — and avoid the potential pitfalls of a foreclosure that could turn your dreams of homeownership into a nightmare.