Buying a House That's in Foreclosure: Is it the Right Move?

There's more than one way to do anything in life, including saving money on a home.

If you're thinking about selling your property in hopes of taking advantage of the recent real estate boom, then you're likely trying everything that you can to maximize your profit.

One way that homeowners are doing this is by buying foreclosures in Alberta — doing this can help you save a considerable amount of money on your next home, but you have to play your cards correctly.

That's why we suggest that buyers spend some time researching before jumping into a rash decision that they may end up regretting.

Continue reading to learn more about the various pros and cons of purchasing Alberta foreclosures and whether it's the right choice for you.

What does "buying a foreclosure in Alberta" mean?

Simply put, foreclosed homes are properties that the previous owner can no longer afford.

When this happens, the home gets turned over to the mortgage lender, who then sells the property. The mortgage lender does this in hopes of recouping as much of their initial investment as possible.

Why are foreclosed properties so cheap in Alberta?

Although there's no set-in-stone price difference between foreclosures and new homes in Alberta, buyers can generally save upwards of 20% by purchasing a foreclosure property (depending on the home's size, location, and condition).

So, this leads to the question, "why is there such a stark price difference between the two options?".

In most cases, mortgage lenders don't love the idea of having a collection of unprofitable foreclosures. So, in hopes of recouping their investment, most mortgage lenders will sell a foreclosed property at a discount.

With all of this said, it's easy to see that opting for one of the foreclosed homes Alberta has to offer can be a smart decision.

Pros and cons of purchasing a foreclosed property in Alberta

Like any property in Canada, buying a foreclosed home in Alberta can be a double-edged sword; knowing the pros and cons of buying a foreclosed property can help you decide if it's a good decision.

What are the pros of buying a foreclosed property in Alberta?

Here's a brief list of some of the pros of buying a house in Alberta:

• Significant savings
• Lucrative for property flippers
• Dropped fees

Significant savings — As mentioned above, homeowners in Alberta can save a pretty penny by investing in a foreclosed property. If your only option is to buy at or below market value, then a foreclosed home may be the right (or only) option.

Lucrative opportunity for property flippers — If you're a new or experienced property flipper in Alberta, then leafing through the local foreclosures may be a profitable way to spend your time.

For those that don't know, property flipping is the act of buying a worn-down property, refurbishing it, then selling it for a profit. Property flippers can generate hundreds of thousands of dollars from a single sale. Furthermore, property flippers can make even more money if they are able to find a foreclosure in a popular locale.

Dropped fees — Aside from the fact that foreclosures are sold at a lower price, buyers can also take advantage of a unique perk: dropped fees. If a particular foreclosure isn't moving fast enough, the mortgage lender may decide to remove liens, back taxes and unpaid loans from the previous owner. Taking advantage of this perk allows you to save even more cash in the long run.

What are the cons of buying a foreclosed property in Alberta?

Some of the cons of buying a foreclosed home in Alberta include the following:

• The condition of foreclosures can vary
• The mortgage lender is no longer responsible for the property
• Potentially high home insurance rates

The condition of foreclosures can vary — The price of a foreclosed property isn't just based on the mortgage lender's urgency to sell the property; it's also affected by the home's condition. It's not uncommon for foreclosed properties to get burglarized, vandalized, or become dilapidated, rendering them unlivable. Dealing with these issues isn't free; thus, it will cut into your overall savings.

The mortgage lender is no longer responsible for the property — When you buy a foreclosed property in Alberta, you take on all the responsibility for any liabilities related to the home. This means that if an issue occurs, you'll have to cover the costs. Some examples include:

• Zoning issues
• Structural issues
• Electrical inconsistencies

Potentially high home insurance rates — As mentioned above, the condition of foreclosed properties can vary from average to unlivable. The state of the home will likely play a role in determining the price of your home insurance rates.

As you may know, one of the things that influence your rates is the quality of your home. If your home has a damaged roof, outdated electrical systems and is in a high-risk neighbourhood, you'll likely have to pay more for coverage.

Do you want to save on home insurance in Alberta?

If you want to save on home insurance in Alberta, be sure to contact a Surex insurance advisor. Our team of insurance advisors is always happy to help you find and compare the best home insurance quotes on the market.

Not to mention, our team works fast — we can supply you with upwards of ten home insurance quotes in less than ten minutes.

Call or click today to learn how we can help you save up to 25% on home insurance!

Home foreclosures Alberta — is buying one the right choice for you?

At the end of the day, there's no right or wrong answer to the question "should you buy a foreclosed property in Alberta?".

We feel that the answer depends on what your end goal is, how much risk you're willing to take and how knowledgeable you are about the process. We hope that this guide has given you a better idea of what these risks are and if they're worth taking. If you have questions about insuring a foreclosed property in Alberta, don't hesitate to get in touch with a Surex insurance advisor.