5 steps to Buying A Foreclosure
Potential for a great bargain is there, but you have to know what you’re getting into.
With more than 1 million U.S. homes in some phase of foreclosure, great deals abound – if you know how to separate the wheat from the chaff.
Bank-owned properties, or homes that lenders have seized through foreclosure and have put up for sale, often sell for even less.
Foreclosed homes are typically sold “as is”, even though many fell into disrepair as their former owners struggled with money troubles. Other homes sit vacant for months or years, attracting vandals or falling into further decay.
How can you tell the good from the bad and the ugly?
Here are 5 tips to buying a foreclosure:
- Focus on REOs if you are a novice
- Inexperienced buyers should steer clear of foreclosure auctions and focus on real estate owned properties (REOs)
- REOs are similar to a traditional home purchase. Typically allows a home inspection and the use of mortgage for financing purposes.
- Inspect Properties Carefully
- Hire a home inspector to complete a detailed home inspection on any foreclosure you are considering. Then present the seller with a list of all the problems and estimates – this might help you negotiate a lower price.
- Set up financing in advance
- Many short sales and REOs attract multiple offers, so you should have your financing set up in advance – get preapproved for a load before looking at properties.
- Find an experienced agent.
- An agent will help you navigate through the process
- Research your market
- Study the local foreclosure scene carefully and understand how much properties are selling for, how quickly they are moving and how much a distressed home’s value will likely rise.