Foreclosure Homes: Tips For Buying Foreclosure Homes

Posted on October 25th, 2007 by hinson

Right now there is a national mortgage foreclosure crisis that spells disaster for millions of homeowners. But while this is bad news for so many, it represents a fertile opportunity for those fortunate enough to be in a strong financial condition. This being said, it is also important to add that buying pre foreclosure or foreclosed properties also has its risks if the buyer isn’t well informed before he acts.

Properties in Pre-Foreclosure

First, you need a solid strategy for buying pre-foreclosures because it’s preferable to do so in a situation where everybody is a winner. The three parties who have a stake are you, the homeowner and sometimes the lender as well. The homeowner, who is now seriously delinquent and in default, is very likely to entertain investor’s offers. In addition, you should remember that you are probably not the only investor with this idea since lists of properties in default are available from numerous sources including the Internet. You can, however, rest assured that in most cases, you’ll have little competition for the property.

You will need to do some research on the properties that interest you prior to making any offers. Here are a few guidelines:

First, locate properties in default in your area(s) of interest. They can readily be seen on services like RealtyTrac.Com on line. Realtors have lists as well.
Perform an evaluation on each and every property that interests you in terms of location, price and condition, then select a few from the list.
Now, inspect the properties you have selected. Take your time and be thorough.
Talk to the owners. Determine their needs, flexibility and motivation to sell.
Find out the current market value of the properties. Estimate repair costs, potential sales price and the profit you might expect to make.
Once a final selection has been made, determine a default work-out by talking to the owner and his lender.
Close on the property as quickly as you can, get the repairs made and sell it for a profit without too much delay.

Buying At The Foreclosure Auction Sale

When you buy a foreclosure home at the auction sale, you stand a very-good chance to obtain it at well below current market value. At this sale, which is publicised and open to the public, the highest bidder wins. You can expect more competition than you’ll find with pre-foreclosure purchases, but the opportunity for significant profit rises too. The danger here lies in buying at a sale when you don’t have the financing pre-arranged. In most cases, auctions state that the buyer must make a small down payment on the spot with the balance due in anywhere between one and thirty days. Have your deposit (cash or certified check) on hand and the financing set up prior to attending the sale. If you can’t arrange financing in the time allotted, you will most likely lose your deposit and the property will be re-sold at a second auction. Don’t forget that auctions sell properties in “as is” condition, so be sure you have made the proper inspections before you bid. Finally, don’t attend an auction until you have firmly decided what your maximum bid will be.