The benefits of buying a repossessed or foreclosed home include buying the home for less than market value and the wide availability of homes at various price points, notes Trulia. Some drawbacks to buying foreclosures include stiff competition from other home buyers, inability to get financed for a foreclosure, and the need to make repairs to the home.
Foreclosed homes often sell at deep discounts, reports Trulia. If the home is in pre-foreclosure, homeowners may be willing to sell at lower price points to avoid the foreclosure going through. Banks do not want to hold on to foreclosed or distressed properties, so they often price the homes lower than market value to save on the maintenance and upkeep of the home and to avoid paying taxes on the property. Additionally, foreclosures are widely available, with both luxury homes and starter homes among their numbers. This makes it easier for buyers of all budgets to find foreclosed properties.
One of the biggest downsides to buying a repossessed home is that the home may be in a state of disrepair or have a lot of damage that needs to be fixed. Some lenders will not finance distressed properties, and home buyers buying repo homes at auction must have cash on hand to make their purchases.