Buying Foreclosed Homes

How to buy a foreclosed home

Foreclosed homes are now almost 50% of the market in many parts of the country. Buying a foreclosure is a very good way to get a great deal in a home; and now is a great time to buy one. But it requires a little more caution and and due dilligence than a typical home purchase. Today I'm going to give you some tips on buying and some pitfalls to beware of in the foreclosed home buying process.

How to find foreclosed homes

In times past, locating foreclosures was a bit more difficult than it is these days. They were a tiny portion of the housing market; and were usually sold to investors before they were ever advertised to the public. Today is a totally different housing market. foreclosure homes are easily located through agents, on the internet or in classifieds. However there's much more to consider once you've found one of these homes. I would never suggest anyone go into the purchase of a bank owned home without the help of an agent who has experience in this type of purchase.

Pitfalls to watch out for

The foreclosure laws vary from state to state. Almost all states allow a redemption period. This is a period of time after the home is foreclosed on in which the owner can pay the mortgage and regain ownership. If your agent is experienced in foreclosure purchases he or she will be aware of the laws in your state. However you should make sure that the redemption period has expired before making an offer.

Foreclosed homes will often have been neglected and need repairs. Some needed repairs may be very expensive and may not be obvious in a visual inspection. These homes should always be inspected thoroughly by a professional home inspector and a list and cost of any repairs should be closely considered before making an offer. Just as an example of what can happen, I'll share an experience that a friend of mine had with buying a foreclosed home. The previous owner of this particular home, before moving out had flushed dry concrete down the toilet. This was a problem that was not in any way visible in an inspection and remained undetected until after the home was purchased. Of course the whole septic system had to be dug up and most of it replaced costing thousands of dollars.

All to often when people buy foreclosed homes, they learn that utility bills have been unpaid for many months. They end up having to pay thousands of dollars in past due utility bills before they can get there power and gas to the home restored. You should always check for this before making an offer.

There can often be title issues with these homes. Even though a title search will be done before closing; title issues can still come up years after a purchase. You should never buy a home without purchasing title insurance. Considering the cost is of title insurance it is well worth it.

Making an offer

First of all when making an offer you should be prepared for a long wait. It can sometimes take months for a lender or asset management company to respond to an offer on these homes.

Normally, the longer the lender holds the property, the less they are willing to accept. To a bank or mortgage company, owning real estate is not an asset; it is a huge liability. The longer they own the property the more money they lose. So one huge factor in deciding how much to offer is knowing how long the lender has been holding the property. You agent can get this information from the mls. If a lender has held a home for more than a few months, you may be amazed at just how cheap they will sell. I have often made offers and had them accepted, for less than 50% of market value.

Many first time buyers would like to buy foreclosed homes but just are afraid of the unknown. But the unknown can work to the buyers advantage when he or she knows what to expect, what to look for and what to avoid. Buying foreclosed homes, when done correctly, can be well worth the extra work and time it takes.