How to Buy Foreclosures

Anthony Jackson, a second-grade teacher in Chicago's metro area, says the key to buying a foreclosure is to "strike early once you see the listing" and "don't bid too low."

Jackson bought a bank-owned three-bedroom, single-family home with one-and-a-half baths in the Chatham neighborhood of Chicago.

"I made an offer the second day after it went on the market," says Jackson, who was working with a real estate agent. "There were a couple of bids thrown in the day after I contacted the bank. Another day of waiting -- I probably would not have gotten it."

Jackson didn't know much about buying foreclosures before putting in a contract for this home. He'd spent the previous five months reading online articles about how to buy a foreclosure and asking questions of his agent before bidding on this one. He ultimately put in an offer that was 15 percent under the $57,000 list price and the bank countered two days later around 10 percent under. He bought the move-in-ready home for about $52,000, closing two-and-a-half months later.

"The home only needed minor cosmetic upgrades," he says. "I got lucky with this one by bidding reasonably."

Buying a foreclosed home may seem to some like a scary process, but as was the case with Jackson and many others, it's similar to buying any other home, especially if your offer is on a bank-owned property versus one sold at auction (which can be a tricky process for the inexperienced).

There are, however, many nuances that any potential buyer has to be aware of when dealing with foreclosures, such as checking for liens against the title, or knowing that on a foreclosure "even something as simple as cracked paint can make an FHA loan impossible," says Twin Cities foreclosure expert Tim Kindem, a Keller Williams realty agent.

Here are some other very important basics about buying properties in foreclosure.