If you’ve been searching for a home, you’ve probably seen some homes in foreclosure. What you might not understand is exactly what that means and how it affects the local real estate market. Foreclosure is a process where the lender takes back ownership of a home from the borrower, because the borrower is behind and no longer making payments on the home.
Common Reasons for Foreclosure
While the reasons for foreclosure vary by situation, there are some common reasons for a home going into foreclosure.
Divorce. Divorce may change lives and financial situations. When the household splits, the home can get lost in the battle and payments can get behind.
Illness or medical bills. Both unexpected sickness and large medical bills may cause foreclosure. Medical bills can get expensive, and they can easily take a toll on a person’s finances if they don’t have the funds to cover the bills.
Loss of a job. Again, it’s the unexpected financial problems that take people by surprise and lead to them losing their homes. Most people don’t plan for job loss and don’t have the backup funds to keep up with their house payments, should it happen.
Death. A death in the family is devastating, and the financial results can be heartbreaking. Death can lead to foreclosure in a number of ways. For example, if the main provider for the family passes away, income will drop substantially. In other scenarios, a death in the family can lead to arguments over property and money, and a home can easily get lost in the chaos.
Effects on the Local Market
While foreclosure mainly affects the borrower and the lender, it may also have an effect on surrounding properties. Foreclosures can affect the perceived value of the neighborhood. Multiple foreclosed homes in a neighborhood can understandably lead new homebuyers to think twice about buying a home in the area. Also, if the homes in foreclosure look unkempt and neglected, it can reflect badly on the neighborhood as a whole.
Buying a Foreclosed Home
You may be wondering, who would want to buy a foreclosed home? While the circumstances that put a home in foreclosure aren’t always the most favorable, it still provides some benefits for home buyers.
Foreclosed homes are often sold at prices lower than market value. If the home is still in pre-foreclosure, the homeowner may want to sell the home as-is for a lower price to avoid going into foreclosure. These types of sellers are also often in a hurry to get the home off their hands, speeding up the sometimes lengthy buying and closing processes. While some foreclosed homes are neglected toward the end of ownership, that isn’t always the case — some may only need a few minor repairs or none at all.
By weighing the pros and cons, you can determine if buying a foreclosed home is the right option for you. If you’re interested in purchasing a foreclosed home, start the process by contacting an agent who specializes in foreclosures. The home buying process differs just a bit, and it pays to have someone with the right experience in your corner.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Altisource Online Auction, Inc., Altisource® or any Altisource affiliate. The foregoing content is not intended to constitute, and in fact does not constitute, financial, investment, tax or legal advice by the author, Altisource Online Auction, Inc., Altisource or any Altisource affiliate.