How to Buy a Foreclosure Home
In many respects, buying a foreclosed home is similar to buying any other home. The key steps
If you are in the market to buy a home or have been thinking about getting into real estate investing, foreclosures have probably been on your mind. As attractive as it seems, buying a foreclosure can become an overwhelming and risky business proposition if you don't know some very important basics about buying properties in foreclosure.
In many respects, buying a foreclosed home is similar to buying any other home. The key steps include finding a foreclosed property and negotiating the right price. There are many stages as well as nuances that any potential buyer has to be aware of, however, when dealing with foreclosures. If you are a first time home buyer or have never been a part of a foreclosure process before, working with an experienced real estate agent might be beneficial. Your agent will guide you through any hurdles of buying a foreclosed home and make your home buying experience more straightforward and less stressful.
Finding a Foreclosure Property
Current market conditions make finding foreclosure deals really easy. Here are some most popular ways of locating foreclosures in your area:
-- Banks. Many bank websites maintain online listings of the properties in their possession that are available for sale.
-- Asset management companies. Some lenders hire asset management companies that handle foreclosures on the lender's behalf.
-- Auction companies frequently hold auctions where they sell huge volumes of foreclosure homes on a single day. You have to be very familiar with the specifics of home auctions in order to participate.
-- Real Estate Signs and Agents. You can always ask your agent for a list of foreclosed homes in your area. While driving through neighborhoods in search of a house, watch for signs that indicate foreclosed homes. The posts might say "foreclosure", "REO property" or "bank owned".
Negotiating the Right Price
Why do people get obsessed with foreclosures, you ask? Negotiating an appropriate discount price is the key. Discounts on foreclosed homes should justify the uncertainty that home buyers will have to deal with when buying a house that has been vacant and not properly maintained for a while.
Your real estate agent will help you to prepare and make an offer for the property of your choice. In order to estimate a potential discount you can get on a foreclosed house you have to know its market value as well as the amounts of any loans and liens that this property has. Make sure you consider any necessary repair costs when preparing your offer. You should also try to determine the amount of any loans and liens against the property, which will give you an idea how much the bank will make or lose by selling the property.
If it is a bank owned property, your offer will be similar to a typical home purchase offer that is contingent on a title search and a full home inspection. If you deal with a home auction, you will be required to make a home bid at that auction and be ready to pay cash in most of the states. No inspection can typically be done on homes offered at auctions. Make sure you do your up front research first before joining a home auction.
Should You Bother?
In order to avoid as many roadblocks as possible when dealing with a foreclosure purchase, it is recommended that you to spend time learning about the standard foreclosure process and various types of foreclosures that you might have to deal with. REO properties and pre-foreclosures are just a few examples. The safest way to buy a foreclosure is to acquire a bank owned property. Banks also offer the easiest process for inexperienced buyers looking for a foreclosure.
Foreclosure deals are worth a try. According to various online sources, you can buy a foreclosure at up to a 30 to 50% discount, but a typical price is usually only 5% less. Even if deeply discounted foreclosed homes are hard to find, having a variety of foreclosed homes on the market gives home buyers an opportunity to find a house at a below market price.
More Interesting Facts on Foreclosures:
Did you know that forclosures is the most common misspelling of the word foreclosure?
Did you know that foreclosure laws can differ by state?
Did you know that a short sale can be a sound alternative to falling into foreclosure?
Find out more from AOL Real Estate's Foreclosure Center