Owning a home is every American's dream, and one of the ways that many Americans realize this dream is by buying foreclosures.
A foreclosure happens when a homeowner is not able to pay the mortgage fees on the property and is therefore, forced to give up the property to pay back what is owed.
There is no shortage of foreclosed properties in today's market (approximately three million foreclosures are expected to happen this year alone), so you have a lot to choose from, especially in areas where there is a high concentration of distressed properties.
One of the advantages of buying foreclosures is that the prices are not too expensive, usually ranging from 20 to 80 percent below the market value.
However, buying a foreclosed property is risky and more complicated than a conventional purchase.
It takes more effort, on your part, to make sure that the homeownership process is as smooth as possible.
You must do your homework.
To avoid making costly mistakes, these do's and don'ts of buying a foreclosed property must be kept in mind: Do: Investigate the advantages.
Foreclosed homes are usually sold with significant discounts.
Be forewarned that sometimes the cheaper the home, the greater the issues you will face in maintaining it.
Work with a real estate agent who is an expert in foreclosures.
You need to interview agents and ask them for information on foreclosures and distressed properties so that you will know if they are experts.
Familiarize yourself with the law.
Foreclosure laws may vary from state to state, and not all real estate agents are familiar with these laws.
You need to review the foreclosure laws in your state and then get legal advice from a local real estate attorney.
Inspect the property.
Some foreclosures are in good shape, while others badly need maintenance.
Hire multiple inspection specialists.
One specialist is not enough to tell you that a property is in good condition.
Hire an electrician to locate the electric system, hire a plumber to take a look at the plumbing system, hire a pest control person to test the house for termites, etc.
Choose a home that is already vacant and is ready for you to move in.
A home that is not immediately vacant usually means additional red tape because you have to go through the hassle of meeting with the bank or lender and obtaining the necessary preparations in order for you to move in the property.
Ask your agent to check the prices of nearby or comparable homes.
This is to ensure that you are really getting a bargain.
Don't: Buy in a neighborhood where foreclosure signs are common.
You are making an investment, so you have to look for a home that is going to start gaining in value very soon.
Search too broadly.
Foreclosed properties are in plentiful supply and you may get overwhelmed by its sheet number.
Target only a specific neighborhood so you can choose properly.
Shop only on price.
Properties that are priced very low probably have issues.
Just like shopping in a store, there might be something wrong with a low-priced property.
Participate in bidding wars.
There is plenty of supply in the market, and plenty more to come, so there is no need to participate in bidding wars over these properties.
The easiest way to purchase a foreclosed property is from a bank.
Banks are very eager to sell a foreclosed property, and they will settle outstanding debts on the property so they can put it on sale with a clear title.
Beware of buying foreclosed properties at auctions.
Most of the time you are not allowed to inspect the property and you have to be able to produce money for the property in cash.
Note that buying foreclosed homes involves more paperwork than a traditional purchase, most especially when a government agency is involved, so expect that the process will take some time and you will go through many hurdles before you will be able to get your hands on your chosen home.
A foreclosure happens when a homeowner is not able to pay the mortgage fees on the property and is therefore, forced to give up the property to pay back what is owed.
There is no shortage of foreclosed properties in today's market (approximately three million foreclosures are expected to happen this year alone), so you have a lot to choose from, especially in areas where there is a high concentration of distressed properties.
One of the advantages of buying foreclosures is that the prices are not too expensive, usually ranging from 20 to 80 percent below the market value.
However, buying a foreclosed property is risky and more complicated than a conventional purchase.
It takes more effort, on your part, to make sure that the homeownership process is as smooth as possible.
You must do your homework.
To avoid making costly mistakes, these do's and don'ts of buying a foreclosed property must be kept in mind: Do: Investigate the advantages.
Foreclosed homes are usually sold with significant discounts.
Be forewarned that sometimes the cheaper the home, the greater the issues you will face in maintaining it.
Work with a real estate agent who is an expert in foreclosures.
You need to interview agents and ask them for information on foreclosures and distressed properties so that you will know if they are experts.
Familiarize yourself with the law.
Foreclosure laws may vary from state to state, and not all real estate agents are familiar with these laws.
You need to review the foreclosure laws in your state and then get legal advice from a local real estate attorney.
Inspect the property.
Some foreclosures are in good shape, while others badly need maintenance.
Hire multiple inspection specialists.
One specialist is not enough to tell you that a property is in good condition.
Hire an electrician to locate the electric system, hire a plumber to take a look at the plumbing system, hire a pest control person to test the house for termites, etc.
Choose a home that is already vacant and is ready for you to move in.
A home that is not immediately vacant usually means additional red tape because you have to go through the hassle of meeting with the bank or lender and obtaining the necessary preparations in order for you to move in the property.
Ask your agent to check the prices of nearby or comparable homes.
This is to ensure that you are really getting a bargain.
Don't: Buy in a neighborhood where foreclosure signs are common.
You are making an investment, so you have to look for a home that is going to start gaining in value very soon.
Search too broadly.
Foreclosed properties are in plentiful supply and you may get overwhelmed by its sheet number.
Target only a specific neighborhood so you can choose properly.
Shop only on price.
Properties that are priced very low probably have issues.
Just like shopping in a store, there might be something wrong with a low-priced property.
Participate in bidding wars.
There is plenty of supply in the market, and plenty more to come, so there is no need to participate in bidding wars over these properties.
The easiest way to purchase a foreclosed property is from a bank.
Banks are very eager to sell a foreclosed property, and they will settle outstanding debts on the property so they can put it on sale with a clear title.
Beware of buying foreclosed properties at auctions.
Most of the time you are not allowed to inspect the property and you have to be able to produce money for the property in cash.
Note that buying foreclosed homes involves more paperwork than a traditional purchase, most especially when a government agency is involved, so expect that the process will take some time and you will go through many hurdles before you will be able to get your hands on your chosen home.
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