If you are looking to purchase a foreclosure in North Carolina please watch the video below and then give me a call or visit my master page on foreclosures. Myself or someone on my team will be able to assist you in this complicated process. We have helped people buy foreclosures in Chatham County and Wake County and from Pittsboro to Chapell Hill and Raleigh, Cary and everywhere in between.
Is Buying A Foreclosure More Expensive Than a Regular Home Purchase?
Typically, yes, a foreclosed home will end up costing a buyer more money, both upfront, and in the long run. Anyone looking to purchase a foreclosed property is going to have to face hurdles such as large down payments, difficulty in securing a loan, and high interest rates.
During the process of applying for a loan for a foreclosure, the lender will perform an appraisal of the home. The three grading levels for these appraisals are good, fair, and poor condition. In a vast majority of cases, a bank or mortgage lender will not approve a loan for a property that is not in good condition.
This then becomes a problem, and foreclosure properties are very rarely in good condition. People who are having their homes taken away from them by lenders don’t usually respond very well, and can sometimes do quite a lot of damage to a home before leaving it. We’ve seen instances of windows being broken, holes being punched in walls, carpets being stained or otherwise destroyed, permanent appliances like ovens, dishwashers, and HVAC units being removed, and wells being filled in with concrete.
Additionally, the foreclosure process is not a rapid one. Homes can be completely vacant for 6 to 18 months, time in which many bad things can happen to a house when there’s no one there to maintain it properly. Any one of these types of damage to a property is going to result in it no longer being considered as good condition by the lender, which eliminates the possibility of a mortgage.
For anyone looking to buy a home in this condition, cash purchase is going to be one of two options available. The second is using a home equity line of credit to secure a mortgage on the foreclosed home. Essentially, that means using an existing home as collateral on the purchase of a foreclosed home.
This process can be especially frustrating for young buyers of first time buyers that are eager to buy a home, and are willing to put in the time and effort into fixing up a damaged home. Despite their enthusiasm, they are unlikely to convince a bank or mortgage lender to provide them with a traditional loan in order to purchase the home.
Even the few homes that are considered to be in good condition, the process isn’t much easier, even for people with exceptionally good credit that would otherwise be able to secure a mortgage rather easily. The problem is that, statistically speaking, a home that has been foreclosed on once is very likely to be foreclosed on again, regardless of who the buyer is. For this reason, banks and mortgage lenders put an very negative stigma on foreclosed properties, knowing that the risk of a new borrower defaulting on the loan is a more than average likelihood. In response to this, anyone who is able to secure a loan for a foreclosed property is going to end up paying a much higher interest rate.