Buying a foreclosed property in New Jersey or any other state may allow you to purchase a property for less than its market value. However, there may also a few potential downfalls to pursuing a home that has been foreclosed on by the lender. There may also be additional variables to consider if you are buying a home financed with a Federal Housing Administration (FHA) loan.
The home may not be in great condition
It isn’t uncommon for a foreclosed home to sit vacant for months or years. Therefore, there is a chance that you’ll be acquiring a property that has broken pipes, a wonky electrical system or a rodent problem. When you take ownership of the home, you’ll be responsible for fixing these and other issues that the property may have. It is important to consider whether it’s worth spending the time or money that it will take to make your house into a comfortable home.
You may face a deadline to close on a transaction
If a mortgage was backed by the FHA, possession of a foreclosed home transfers to the Department of Housing and Urban Development (HUD). Generally speaking, you’ll have 45 days to complete the process of buying the house after your offer is accepted. This means that you’ll need to get a mortgage, have an inspection done and complete other tasks within a period of about six weeks. You’ll also need to make an initial deposit on the property before closing.
You may not qualify for certain types of financing
Traditional lenders will not finance the purchase of homes that lack appliances like a stove or refrigerator. Furthermore, a FHA loan will likely be denied if heat, water or other utilities are turned off after a property goes into foreclosure.
If you are looking to purchase a foreclosed property, you may want to do so with the help of a real estate law professional. This person may review your purchase offer or take other steps to ensure that you make educated decisions during the closing process.