How to buy a foreclosure?

[Matthew Ray]

I am seeing a lot of foreclosures in my area and I'm interested in how to buy these properties at the discounted rates. Are they cash only offers directly to the banks? Can I get traditional loans to do so? how do I find any liens against these properties?

Thanks in advance!

[Cortney Jones]

@Matthew Ray  when you say, "seeing a lot of foreclosures in my area" I'm going to assume you mean from the mls system?  

There are different aspects to the foreclosure business. Some investors buy foreclosures from the mls through a realtor. These are properties that have already gone through foreclosure and been taken back by the bank and put up for sale. Also called REO (real estate owned) In these cases, yes, you buy them just like any other house and you can usually use traditional financing. Your realtor would negotiate with the bank, on your behalf, to get you the best deal. Depending on how competitive your market is, the condition of the house, how long it's been on banks books, etc. that discount could be as little as 10% and as much as 50-60% . Before you close on the house and can secure a loan your lender will have the title company do a title search to make sure all liens are off the property.

Some investors also buy what's called pre-foreclosures.  These are deals that investors try to find BEFORE the bank takes them back.  There are a variety of ways to find them - direct mail to people who are late on mortgage payments, have delinquent taxes, etc.  Bandit signs around town marketing "we buy houses," knocking on doors in high foreclosure areas, and many more.  When buying these you can often get a bigger discount because you don't have attorney fees, bank fees, realtor fees, etc. added on, but you do have to know what you're doing.  Usually on these you would have a title company run a preliminary title search to ensure there aren't any other liens on the property, then you can buy through a variety of different ways - owner financing, subject to, cash, traditional financing, etc.