Foreclosed properties may save home-shoppers tens of thousands of dollars compared with similar real estate in their area. They may also cause some severe headaches.
If you’re looking for a deal and willing to put in the extra work (and down the extra aspirin), here are four factors to consider.
1. VA is OK. There are no rules that forbid the use of VA-guaranteed loans to purchase foreclosed property. You can even search an online database of VA-acquired properties that the agency’s attempting to sell.
2. Appraisers sometimes aren’t. Foreclosed properties may have been abandoned by their owners, may show signs of stress caused by a lack of upkeep, and may have be on the market “as-is.” These aren’t good signs entering a VA-certified appraisal, which will look closely at roof condition, electrical and plumbing systems, and other home basics that may suffer during or after a foreclosure. Click here for full VA appraisal guidelines (see Chapters 11 and 12).
3. Value issues. Appraisers use comparable nearby properties to set a value on your new purchase; if the value is set below the sale price, complications can arise. This could present a problem if your foreclosure is in an area with few bank-owned properties or short sales, as it may be compared with similar properties that have been sold under circumstances more favorable to the seller, driving up property values.
If you feel that your appraisal isn’t in touch with market realities, ask your lender or agent to make a Reconsideration of Value request. Get some more ROV details here.
4. Foreclosed, but not for sale? Some online listings may include foreclosed properties that appear in local government records. These loans have gone bad, but just because you’ve stumbled upon the listings doesn’t mean the listings are ... well, listed.
”Yes, these homes are probably foreclosures, but it does not mean that they are on the market, and there's no timeline for when they will be,” said Cassandra Rowley, a Navy veteran and Realtor in the Seattle area. “I have buyers regularly ask me to research these, but I don't know anything more than what they can find on the county website.”
Ready to start the loan process? Visit our VA Loan Center.