The Catch With Cheap Foreclosures
There is a myriad of cheap foreclosures available on a national level that are selling for next to nothing. Homes are being foreclosed on for as little as $6 in interest. So do they make a good buy for real estate investors, and what potential pitfalls await those that aren’t careful about the homes they buy?
$6 homes might sound great to some, but what legacy issues might come along with them?
In Pennsylvania, the Financial Post reports one woman was foreclosed on due to a $6.30 penalty for paying taxes late. The $280,000 home went to auction for a fraction of its value. This may have made a great investor buy, with a couple of exceptions.
As with many short sales and foreclosure properties, which are too cheap, there can be a catch.
In this case, the previous owner is still living in the house, even though it was sold over 2 years ago. The previous owner has been awarded a new court date to challenge the foreclosure and sale of the home.
Yes, there are great deals on short sales and cheap foreclosures all over the country. However, there are going to be catches with really dirt cheap foreclosure homes like those being sold in PA and MI. Pay attention to how the home changed, and is changing hands, what repair issues are lurking, if properties will need to be demolished, and what zoning and code restrictions there may be.
As in this case, it can also be much smarter to make sure previous owners are completely moved out before executing the real estate closing.
Finally, this is a great lesson in the importance of obtaining title insurance on each and every deal, with no exceptions.