The Risks & Disadvantages of Buying a Foreclosure

Home Maintenance

One of the main disadvantages of purchasing a foreclosed home is that they are often in a state of disrepair and may require immediate renovation and upgrades. Foreclosure properties are commonly sold "as is," meaning the seller is not responsible for any problems with the home. According to MSN, "tree limbs in front yards, broken appliances and windows, and dirty carpets, floors and walls are found in even very-affluent area foreclosures." Problems like leaky roofing or a bad foundation could require thousands of dollars to remedy.

Foreclosed homes are often sold at auctions that may require buyers to put down a large sum of money immediately upon purchasing the home. The purpose of an auction is to get as much money for a property as possible. If other bidders are interested in a property, you could end up paying more for a foreclosure than you expect or you might be outbid. In addition, you may not be able to inspect a home before buying it at auction.

Home foreclosures can happen anywhere, but they tend to be clustered together, often in run-down neighborhoods. Living in a neighborhood with a high number of foreclosures means you will have fewer neighbors to watch out for criminal activity. According to the National Institute of Justice, high foreclosure rates are associated with an uptick in activities such as "theft, vandalism, squatting and arson."

The prices of foreclosure properties may be below the market average for a given area, but that does not necessarily translate to lower taxes on the property. Local governments periodically assess the value of homes to calculate real estate taxes, but assessed values can exceed the purchase price of foreclosed homes. If a bank sold you a dilapidated home for $5000 simply to get it off their hands, the real estate taxes could still amount to hundreds or thousands of dollars a year.