Should You Buy A Foreclosed Home? (Repost)

Sep 12, 09 Should You Buy A Foreclosed Home? (Repost)
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This post was originally published on January 25, 2009.  Since then, many analysts believe that the housing market has nearly bottomed out in many markets.  Granted, buying a foreclosed home is not as easy as it sounds, primarily because there can be a lot of red tape surrounding foreclosed properties.  But what was true eight months ago is even truer now.

The idea of owning a home is in many ways integral to the American Dream. The notion of property ownership conveys the idea that you have a stake in the future of the country. Those witha vested interest are more apt to do what is required to protect their investment. However, the rapid deflation of the housing bubble has had a chilling effect on the housing market. According to many bankers and economists, there is a real possibility that banks have a large number of unlisted foreclosed properties on their books. As they begin to slowly list what properties are on their “ghost inventories“, housing prices will drop even more. The sheer overload of foreclosed homes leads to a lag between repossession and a house being placed back on the market. The enormous number of properties, coupled with severely depressed prices, leads to a logical consideration, “Should I buy a foreclosed home?”

During the height of the housing bubble, owning a home was seen as a better investment than owning stock. Rather than appreciating whatever inherent value homeownership has, people became merely concerned with how much their house appreciated.  Even now, realty investors are buying property with the notion that housing prices will eventually rebound. However, economists believe that this adjustment will last well into 2010. When prices do climb again, it is unlikely that they will reach 2003-2006 levels.

Before you decide whether you should buy a foreclosed home, you should seriously contemplate why you want to own a home. As far as the market is concerned, housing prices are expected to bottom out within the next 6-9 months. Unfortunately, because of the credit crunch, you need a high credit rating or large down payment to buy a home in this climate. Financial planners are attempting to debunk the myth that homes are a good (monetary) investment. Others are lauding the value of renting over purchasing.  Taking these points into consideration, it is quite possible to buy your dream home at a substantial discount.

It feels strange to profit from another person’s misfortune. Yet, there are literally millions of vacant homes flooding the market. If you have reasonable expectations of homeownership and an understanding of the benefits and limitations of owning a home, there are values to be found everywhere. Should you buy a foreclosed home? If you can truly afford to buy a home, the time has never been better.

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