Foreclosure Listings:
Get Help Buying A Foreclosed Home

Purchasing a Foreclosure Property

There are several keys to the successful purchase of a foreclosure property and if you follow them the rewards can be substantial. And if you do not, you may be saddled with a money pit with no way to dig out of your financial hole.

Query Your Local Real Estate Agent

Most of the larger agencies have at least one agent dedicated solely to foreclosure properties. Their expertise in this area of business will prove to be very helpful in your search.

Cruise On By

Simply drive through any neighborhood you may be interested in and look for “For Sale” signs. Further, look for signs in front of properties that not only look vacant but also look as though they have been vacant for a considerable period of time. Finally, look closely at the signage to see if there is an additional language that may indicate to you that the property is a foreclosure. Look for verbiage such as “Bank Owned” , “REO” or “Foreclosure”.

Surf The Net

Most of the major banks including JPMorgan Chase, Wachovia, SunTrust and Wells Fargo maintain an online database of bank owned foreclosure properties. These sites are easy to navigate and it is simple to narrow your search. If you plan to finance your foreclosure property via one of these banks you may wish to search their site first.

Now that you have a property that is a good fit for your budget, lifestyle and rehabbing capabilities you will need to view the property you have settled on. As you start this process, be sure to open your eyes to the reality of the situation. Most foreclosure properties do require a certain amount of repair, so never fall in love with one that is more than you can manage. These issues can range from the simple (leaky faucet, outdated kitchen cabinets, or weeds in the yard) to the monumental (black mold growing on the walls, asbestos in the floor tile or lead paint on the trim of the windows).

Once you find a property that you thinks fit’s the bill for you, assess how much you will need to invest in the property to make it livable for your own family, as a rental or as a house you are flipping. Be realistic when it comes to budgeting and never assume things like your brother-in-law will paint the bathroom in exchange for a case of beer. Always leave a column in your budget entitled “Misc. Unforeseen Expenses” and throw a few thousand dollars in that column. Speaking of the budget, be sure to include items such as utilities, property taxes, and homeowners insurance.

Now is the time for formal inspection of the property. The average cost of a home inspection is $300 to $600 based on where the property is located. You will find that this is money well spent and may very well save you loads of time, aggravation and money going forward. The home inspector will check for a plethora of issues including roof condition, foundation issues, insulation, ventilation and electrical capacity. You should get the prices of three home inspectors prior to signing up for their services and ask each of them for a listing of what they intend to examine.

With a home inspection and rehab budget firmly in place, you will work with your agent to place a bid on the property. Find out if the property is being sold to “highest and best” when it comes to the bid. Keep in mind that highest is not always best as far as the bank is concerned. For instance, you put in a bid of $110,000 but you will need to mortgage the property and would like to wait 3 weeks to close. If they get another bid for $100,000 cash with a close date of two weeks they may move forward with the lower offer. Needless to say, it helps mightily to pay cash in these matters if that is at all possible. The bank may also give preferential treatment to those that offer an earnest check listing a larger dollar amount. Touches like this allows the bank to know that you are a serious buyer who has every intention in following through and purchasing the property.

Remember that a short sale is not the same as a foreclosure. A short sale is when the homeowner is allowed, by the lender, to sell the home for less than the amount that is owed on the mortgage. Once this transaction occurs, the mortgage is cancelled. While the purchase of a short sale can also prove to be quite a bargain, the process is much more cumbersome and time intensive.

Discounts on foreclosure properties can be as deep at 40% lower than comparable available houses. While it is a sad state of affairs when a family is forced out of their home due to financial adversity, their misfortune may very well be your goldmine. Follow these steps closely, keeping a close eye on your budget, and you will reap the rewards of home ownership.

Pros and Cons of Buying a Foreclosed Home

For consumers who are fortunate enough to have steady income and/or plenty of savings, this recession is an opportunity to go bargain hunting. This is especially true in the real estate sector. The global economic slowdown began with a housing crisis, and it's the languishing housing market that continues to act as a drag on government efforts to bring about a rapid economic recovery. In some parts of the country, homes are selling for less than $20,000 -- so low that one could literally purchase a home on a credit card. In many states, foreclosure rates are at levels not seen in decades.

Money-savvy consumers across the country have been figuring out ways to capitalize on the depressed housing market, from buying cheap vacation spots to purchasing foreclosed homes, fixing them up and converting them into rental properties. Though the current foreclosure crisis presents plenty of opportunity to buy properties for pennies on the dollar, consumers still need to arm themselves with as much information about buying foreclosed homes as possible, because purchasing foreclosed properties is often far from easy.

Here are some of the advantages and disadvantages of buying a foreclosed home.

Advantages:

• Foreclosed homes often go for super-low prices because lenders and homeowners are simply interested in minimizing losses. Most will end up losing money in the process, but taking a small loss is better than losing everything. This translates to homes selling at prices that are far below their appraised market value. So, the number one advantage: cheap homes!
  
  
• Because the real estate sector is so depressed, and the number of homes in foreclosure is high, consumers have a lot of properties to choose from. If one deal doesn't pan out, a bargain hunter can simply continue shopping for another favorable deal.
  
  
• In many parts of the nation, sliding home values are not expected reverse course any time soon. However, a diligent bargain hunter can often find a foreclosed home at a very reduced price, buy it, and realize immediate equity. Immediate equity -- buying a property at a price that's below the property's appraised value -- is extremely advantageous in any economic environment, and greatly benefits all types of homebuyers, be it the professional real estate investor or the consumer who's buying his or her first home.

Disadvantages:

• Though the national unemployment rate is likely to top 10% in coming months, and the U.S. economy is not likely to return to prosperity any time soon, many Americans made a lot of money during the recent credit/housing boom, and continue to do well today by e.g. investing in recession-friendly stocks, shorting stocks, etc. That translates to competition for high quality properties that are selling at firesale prices, especially in respectable neighborhoods. Homebuyers should assume that they will have to contend with at least some competition for that perfect foreclosed home in that lovely neighborhood, that's selling at a once-in-a-lifetime price.
  
  
• Contrary to what many consumers think, foreclosed properties aren't sold on a first-come, first-served basis. When buying a non-foreclosed home, the buyer can simply make an offer on a property, and the seller can simply accept it. When buying a foreclosed home, the buyer typically has to wait for the property to go to auction before he or she can make an offer. The auction setting provides for a far more efficient marketplace, which means that the buyer is somewhat less likely to get the home they want at the price they want.
  
  
• It may be cost-prohibitive to make necessary repairs, especially if the owner lost interest in the home as a result of financial hardship. Some people, when they find out they are about to lose their home, stop caring about the maintenance of the property. Some spiteful homeowners even damage their own property on purpose: a senseless response to the realization that the homeowner is powerless to save his or her home. Moreover, estimating repair costs can be quite difficult, because, in most instances, a homebuyer won't be able to inspect a home before it goes on the auction block.
  
  If a foreclosed home has been unoccupied for an extended period, the house may fall victim to looters who often strip a vacant home of anything and everything that can be sold, including the copper plumbing. A vacant home may also become severely infested with vermin like cockroaches, mice and rats.
  
  
• Even after foreclosure, some homeowners just don't want to let go. Whether the cause is an emotional attachment to a home, or just plain stubbornness, getting a previous owner out of the place can be difficult. Sometimes formal (and very time consuming) eviction proceedings are necessary to wrest the current resident from a home. No one wants to put a family out on the street, but it's important to remember that no matter what you do, the financial institution holding the note is going to use force to evict them eventually.

No matter what kind of home you buy, you need to do as much research as you possibly can. What kind of neighborhood is it in? How are the schools, roads, and general environment? Is the lifestyle in the area a good fit for you? Those are just some of the questions you should be asking yourself.

Homebuyers should also remember that with foreclosure auctions, you don't get to buy a home via a long term, amortized home loan, also known as a mortgage, in most cases. It's cash or a cashiers check. However, if the property in question is owned by a financial institution like a bank -- also known as a real estate owned (REO) property -- a homebuyer may be able to secure financing from the property-owning bank.

If you find that the property you're interested in is owned by a bank, then patience will be your best ally. Negotiating with banks directly can be frustrating. Be prepared to wait for what might seem like an unreasonable amount of time for replies to your offers and other related correspondence.

Also, remember that sometimes the repairs and other expenses involved in buying a foreclosed home can make it almost as expensive as buying a home at full-price, so be prepared to be disciplined about sticking to your budget. And don't make the mistake of paying more than you wanted to because you got caught up in the frenzy of a bidding war. Emotional bidding is a rookie mistake that could end up costing you thousands.