Planning to Buy a Foreclosure?

Let’s say you are planning to buy a new house either to occupy, or to have as a second home. You have heard a lot about the great deals that are available in the foreclosure market. The chances are you have not purchased a house via the foreclosure process before and if so, you need to understand some things before you try. There are many great bargains out there but the process is different from buying a home in the traditional way, and you can get hurt if you are unaware of the possible pitfalls.

Spend some time to understand the process of foreclosure. Be sure your research is relevant because foreclosure laws do vary by state. The internet has literally millions of sites that deal with foreclosure.

Look into more than one property. In fact, look into as many as you have time for because as you go down the list of things to guard against, you will likely find your list will get shorter. There are lists available online. You might contact the banks in the area where you are looking. Local real estate agents are aware of what foreclosed homes are available in their areas. Local newspapers often carry foreclosures in their classified sections. Lastly, if you know the neighborhoods you like, take a simple drive-through, looking for foreclosure signs.

Unless you plan to pay by cash, get pre-qualified for the mortgage amount you will need. Buying a foreclosure at auction requires that you settle the entire amount on the auction day. Even if you buy a bank owned property where you will get some breathing space, if the house is as good a deal as you think, there will be others looking at the same property. If they have done this before, they know enough to have cash in hand.

Before you make an offer, be sure you understand the value of the house in today’s market. Generally, but not always, foreclosures are great vales. This means, before the offer, be certain you understand the condition of the house. This is not always easy in a foreclosure auction as viewing is often limited. When buying a bank owned property, you will be able to get a close look. Remember that the previous owner is very likely to have let the house slip into disrepair prior to foreclosure. Unless you are experienced in home renovation, you will need to get an opinion from a good contractor as to the costs, and the time, for the needed repairs.

There are a few other important due diligence items. Is the title clean? Are there tenants still in the house? Are there taxes or other liens that need to be satisfied? None of these things automatically disqualifies the house; they just need to be factored into your offer.

Last, know how much you would like to spend on the purchase and how much is your absolute highest acceptable price. Be prepared to walk away if you cannot get the deal you want. In today’s housing market, there will be others.

Original: Planning to Buy a Foreclosure?'