Should You Purchase a Foreclosure Property?

Posted on March 19th, 2008 by Samanta Parks

Since housing prices have cooled down, house hunters who are looking for a bargain are beginning to look more and more at foreclosures. There are several foreclosures that anyone can locate. There are several websites that can help. There are site on the internet that have a list of foreclosed homes and charge the house hunter a subscription fee to access their database of properties. Sites such as RealtyTrac.com and Foreclosures.com offer these services.

Investors are often looking to buy foreclosures. They are looking to buy the property and “flip” them. This means that they buy the properties at a low price, fix them, and sell them for profit. Even with the current housing crisis, some homes are still expensive so home buyers are looking at foreclosures.

The right buyer can find a great opportunity in foreclosures. They can buy a property that is below the current market value. Buyers can save up to twenty percent off the market value of a home. However, some potential buyer will have to put in “sweat equity” because these homes usually need repairs.

Despite some of the advantages, buying properties that have been foreclosed on is harder and riskier than buying a home the usual way. There are some things that a potential home buyer needs to know.

The pre-foreclosure stage is the time period between getting a default notice from your bank or lender and when you bank or lender puts the property on the auction block. This is perhaps the best time to buy a foreclosure. Pre-Foreclosures can offer the greatest bargains. However buying one of these homes can be difficult. Highly skilled investors tend to focus on these.

To begin with, you would need to deal with the homeowner. Sometimes they do not know there house has been placed in a public foreclosure listing. Websites like Foreclosures.com get their information from county records.

After this, even if you and the owner agree on a price, your time may be short to finish the purchase. Depending on the state they live in, they may have as little as thirty days to vacate the property or as long as fifteen months.

An investor will find that while buying a home in pre-foreclosure is difficult, buying a property at auction is even more difficult. First of all you cannot finance a property, you must pay cash. Also, the expectation is that you will buy the house without seeing the condition it is actually in. You also cannot get title insurance.

If no one shows up for a foreclosure auction or no one bids high enough to cover all the expenses of the home, ownership reverts to the bank and it is then sold through a real estate agent. This is an easy way to purchase a property that has been foreclosed on but you will most likely not get a discount. The house will be sold at market value for the most part.

The price may still be negotiable however. If a bank has more foreclosures than they can handle, they may be anxious to get rid of the property.

Buying a foreclosed home can be a great bargain but one must do the necessary research in order to get the best value for their money.