Hoping to Buy a Foreclosure? Here's Why That Will Be Difficult in 2024

To say it's a tough time to buy a home would be an understatement. Not only are mortgages expensive due to elevated rates, but home prices are up on a national scale. In April, the median previously lived-in home sold for $407,600, representing a 5.7% increase from April 2023, according to the National Association of Realtors (NAR).

If you're looking to buy a home but are having a hard time finding one in your price range, then you may be eager to find a foreclosure. The upside of buying a foreclosure is that you might pay a lower price than you would for a home being sold under normal circumstances. But right now, you might struggle to even find a foreclosure to buy, due to the state of the housing market.

There are limited foreclosures available

Distressed sales, which include foreclosures and short sales, made up just 2% of total sales in April, reports the NAR. And the reason there are so few foreclosures available today boils down to elevated home values.

People typically wind up in foreclosure when they can no longer pay their mortgages, but they also can't sell their homes for enough money to pay off those loans. This is known as being underwater on a mortgage.

Because homes are generally worth a lot more today than they were a few years ago, many owners don't need to get to the point of foreclosure, which can drag down a credit score in a big way. They can simply sell their homes, pay off their lenders, and move on.

If you're trying to find a foreclosure today, you can work with a real estate agent to try to find one in your area. But don't be surprised if that's a really tough prospect.

You may not want a foreclosure anyway

If you were hoping to snag a foreclosure to enjoy some savings on your home's purchase price, a lack of availability may be frustrating for you. But remember, buying a foreclosure isn't always a picnic. So it may be a good thing to stick to a regular for-sale home.

Although this isn't always the case, it's often the case that foreclosed homes aren't in the best shape. When people can't afford their mortgage payments, that often goes hand in hand with not being able to afford expenses like home maintenance. So while you might save, say, $50,000 on the price of your home with a foreclosure, you might also have to spend an extra $50,000 once you've moved in just to make repairs and get your home up to code.

Also, when you buy a regular home that needs work, you can often negotiate with your seller to knock some money off of its price in exchange. With a foreclosure, what you see is often what you get because you're not negotiating with a person who owns the home. Rather, you're buying a home from a bank.

The fact that there are so few foreclosures on the market is actually a good thing. It means people are managing to keep up with their payments, or they're able to sell their homes and walk away from their mortgages without wrecking their credit.

There's nothing wrong with continuing to look for a foreclosure. But don't be surprised if you end up having to wait a while for one to become available. And because of the pitfalls above, you may want to buy a regular home instead.