Things to Know When Buying a Foreclosure

Buying a foreclosure can be risky. There are some things that set foreclosures apart from the typical home-buying experience, particularly when it comes to the different levels of foreclosures.

Buying During Pre-Foreclosure

“Pre-foreclosure” refers to the beginning of the process when the homeowner will be getting constant calls from the bank and potentially other creditors. If the homeowner is struggling financially, he or she will not likely just be experiencing difficulty in making a house payment. Other payments will also likely be delayed or skipped. During this time, the homeowner is likely trying to convince the bank to allow them to do a short-sale before the foreclosure hits their credit report. A short sale can be a sound way to solve multiple problems; however, depending on the area where the home is located, the bank may be unlikely to approve this sort of sale. If you move quickly with the bank and your realtor, you can buy a home in the pre-foreclosure stage. Sellers at this stage of foreclosure are willing to do whatever they need to do to sell their home as quickly as possible.   

Buying at an Auction

The second option is to buy at auction. Such a purchase is filled with risk. Foreclosure homes often have unpaid liens and unknown problems. At auctions, cash is the only accepted form of payment, meaning that if the buyer requires a loan to purchase the home, the sale will not be approved. The other risk in this situation is that the buyer may be part of a team of investors, meaning that both the burdens and the gains are shared. In some cases, the team may argue over details related to renovation. This type of conflict leads to other types of nasty problems. If you have ever watched HGTV, you could practically become an expert on some of the niggling, nagging problems that would-be renovators might endure.

Buying During Post Foreclosure

The last chance to get these great deals is during post foreclosure. At this point, a home is known as an REO (Real Estate Owned) property. The lender won at the auction and intends to sell the home to recoup just the amount loaned. The longer it is on the market, the more the bank will be more willing to work with you on purchasing the home from them. Always remember that banks do not enjoy owning real estate. They just want to sell it as quickly as possible. A few things to keep in mind when purchasing a foreclosed property:

1. 1. Always get fully approved from a mortgage lender. They will verify all of your assets, which will help in your negotiating skills and the amount of leverage you have in the deal.

1. 1. Do research on the zip code and location of the homes. You should also check the value of the homes in the area that you are looking in.

1. 1. Make sure that you get the home inspected and be sure to make the offer on if the home has satisfactory condition.

1. 1. See what repairs the home needs and evaluate the costs of these before moving forward.

1. Always remember that you have the upper hand in the negotiation in terms of the closing costs and repairs that the home needs.  

If you want to find foreclosures, work with a local real estate agent in your area. They will have access to a list of homes that are in foreclosure. Always be cautious and patient when it comes to buying a foreclosed home. If you do this the right way, you will be able to find a great home and you may have some instant equity.