FHA foreclosures have been steadily rising in the last three years and the number of new homes getting on the selling block keeps coming by the day. A dominant market is taking a new form today and that is FHA foreclosures.
Real estate market forces have pushed the price tags of homes down nationwide but the number of FHA foreclosures has continued a sustained increase in rate up to this point. Market analysts are even predicting a new wave of foreclosures. This time, it will hit the prime mortgage sector.
At face value, this means more homes priced cheaper will be available for potential homeowners as mortgage lenders are pressed to dispose of FHA foreclosures to ease their liquidity problems. The prospects seem to be attractive for those with sufficient equity.
Words of Caution on FHA Foreclosures
Buyers of FHA foreclosures should be wary with their buying of homes from the FHA foreclosure listing. As would be expected, most of the foreclosure homes for sale are results of default of sub-prime mortgage loans. In this case, a lot of these real estate properties have not sufficiently built on its equity from payment of mortgage from the original homeowners. You might end up with a home with a price tag that is nearly equal to its actual value or at best with only 10% off from the original cost.
Buyers of FHA foreclosures are forewarned of these types of foreclosure homes for sale which investment experts term as “land mines.”
Buyers of FHA foreclosures are strongly advised to do a thorough title search. Study the structure of mortgage on the foreclosure homes for sale. In some instances, there might be a second mortgage on top of the principal mortgage.
These types of FHA foreclosures are not the “best buys” we are looking for.
Another aspect to consider when buying foreclosure homes for sale is that the real estate properties are being sold “as is.” It is then imperative on your part to factor in at least an additional 25% on the price tag of the property you are buying. This amount should cover all the unforeseen costs involving repairs and defects on the home which may not be apparent on initial inspection. You don’t want to end up spending the 30% savings you thought you got from buying FHA foreclosures for repairs and defects you only learn after you go in to your new home.
Another practical tip for would-be buyers is to avoid foreclosure homes for sale that were already on the listing for quite a while already. On inspection you would most likely find out that these homes have significantly deteriorated as most mortgage lenders are hard pressed to maintain an even increasing number of foreclosed properties.
A final reminder to buyers of foreclosed homes; most of the FHA foreclosures were originally owned by people who would have surely gone into serious financial troubles. With this situation in mind, expect these former owners of not being able to have done some decent maintenance and care of the now foreclosed property.
Expect to face some serious house repair of practically all aspects of the entire property. Don’t be surprised to find some punched holes in doors and wall panels courtesy of the former owners of the home.
Once these are sufficiently covered by the would-be buyer, then it is safe to go on to the next phase, and that is to commence the buying of FHA foreclosures.
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