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Thinking about buying a foreclosure? Read this first

The North Dakota real estate market is hot, with plenty of investment opportunities for both sellers and buyers. Thanks to low interest rates and other factors, many potential homeowners are expanding their search to include foreclosures. While there is nothing wrong with purchasing foreclosed properties, without a fair amount of research, it could turn into a nightmare that has far-reaching financial consequences. 

What is a foreclosure? 

In the housing market, properties become foreclosures when owners fall behind on their mortgage payments. Most lenders do not take immediate action when property owners miss payments until the delinquency reaches 60 to 90 days. Banks own foreclosed homes. Foreclosed properties may seem like a great investment, but property owners who lose their homes to foreclosure do not always maintain them. 

The purchase process for foreclosures is lengthier than the traditional process. Those who think they can place a bid and seal the deal within 30 to 45 days may be surprised to learn that foreclosure sales take longer to complete. Once banks regain possession of these properties, it can take several months for them to finish everything that is required to make those houses available as foreclosure sales. 

Foreclosures are as-is 

In regular real estate transactions, buyers can tour properties and negotiate a better purchase price. They can also use missing items and property deficiencies as bargaining chips in price negotiations.

When it comes to foreclosures, many of them are distressed houses. Not only did the previous owners miss payments, but they may have also fallen behind on taxes, liens attached to the properties, repairs and other issues. Instead of using missing items and property deficiencies as bargaining chips in price negotiations, buyers must accept the prices and properties as they are. 

Plan for more than just the mortgage 

Foreclosures can be great investment opportunities, but they can also be money pits. To avoid challenges that can arise with foreclosed properties, set aside some savings specifically for repairs before purchase. Some distressed homes are vacant for months and years. During that time, no repairs are taking place, nor are there utilities. Existing damage becomes worse, leaving the buyer on the hook for expenses. Keep in mind that most foreclosures need some work before they are habitable. Thoroughly researching property history and getting a property inspection can help avoid a disaster.