If you are looking to buy a property, you should definitely be weighing up the pros and cons to buying a repo home. You have several options for buying a house, and looking at a repossession should definitely be on your list.
Buying a home, whether it is for you and your family to live in, to fix up and sell on for a profit or whether you are buying it to rent out as an investment, is a big step. Properties are incredibly expensive and generally require loans from financial service providers to finance them. When you are considering buying a home, it is always a good idea to consider all of your options carefully and weigh up the pros and cons of each of them.
What is a repossessed home?
When an individual purchases a home, they generally need to take out a loan or mortgage with a financial service provider. Once a bank or other financial service provider has approved the loan and the client, they will provide the finance for the purchase. The client is then required to pay back the loan with interest through monthly instalments.
If a client cannot make payments at all or in full or on time, the financial service provider will have to repossess the home. The bank will then hold the property for a period of time to allow the client a last chance to pay them back, and if the client cannot make the payments, the bank will have to sell off the home to make back their money.
Which companies sell repossessed home?
Repossessed homes are usually sold through auctions but some are sold through normal sales. Some financial service providers conduct their auctions or sales themselves, but several banks auction their repossessed homes through large, well-known auctioneering companies like Aucor. Most auctioneering companies will have some repossessed homes on their sales list. Banks like Standard Bank often conduct their own auctions and sales through their My Roof segment.
What are the advantages to buying a repossessed home?
There are several pros and cons to buying a repo home. Some of the advantages include:
- You will not have the stress of worrying whether there is something wrong with the home. Many buyers believe that the previous sellers must have decided to sell their home for a specific reason and the reason must be under the floorboards in the form of wood lice, or within the walls in the form of damp mildew. With repossessed homes, you know that the previous owner did not want to leave and so there is probably nothing sinister hidden within the property.
- You will usually be able to buy the home through an auction. Auctions are good because there is no extortionate set price. The potential buyers decide what they are willing to pay for the home.
- You will be able to inspect the home thoroughly before the auction without having someone else living inside the home.
What are the disadvantagees to buying a house repossession?
There are, of course, several cons to buying a repossessed house over a home through a normal sale.
- Auctions can be overwhelming and difficult. Even if you are prepared for an auction and well versed on how it works, it can still be difficult to keep up with the bidding.
- Auctions tempt you to go over your budget. Because auctions encourage fierce competition, if there is a house that you really like you might be tempted to go over you budget. This is never a good thing
- If you are not buying the repossessed home through an auction, you will have to contend with the prices put on by the banks. They will probably try to make their interest back that they lost on the first owner and so the price might be higher than the home is worth.
Whichever option you choose, make sure you know exactly what you are looking for and what your budget is before you start.