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What you need to know about buying a foreclosed home.

Posted on | July 16, 2009 |

To say that this is a buyer’s market is an understatement to be sure, but that doesn’t mean it’s a no brainer. While there are an unprecedented number of homeowners walking away from their mortgage, creating a record number of foreclosures, it’s still easy to make costly mistakes. Here are some tips to ease the process.

1. Know where to look.

Start without even leaving your home. Check out websites like RealtyTrac.com or ForeclosurePoint.com. These sites allow you to find listings of houses in foreclosure.

2. Know who to buy from.

In short, a bank. Buying a foreclosed home at auction requires you to pay cash, and you don’t even get the luxury of inspecting the property first. Contrast this with a bank owned foreclosure, where any liens have been cleared and you do get to inspect the property first, and you’ll see which is the better option.

3. Hire a contractor.

Foreclosed homes were either owned by people who didn’t care about tending to the property, or people who did not leave on their own terms. This often leads to vandalization and disrepair. Bringing a contractor to inspect the property before you buy, eliminates the possibility that you will underestimate the cost of repairs.

4. Aim low.

There’s a glut of foreclosed homes on the market the likes of which are rarely seen. This means banks are more likely to accept a lower price, just to be rid of the house. Start 20% below the market value, and be prepared to haggle.

5. Be patient.

While the glut of foreclosures means you can score a big discount on the price, it also means the bank has a lot of homes to process. This means it will likely take some time to finish the deal. Be ready to wait.

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