How To Buy A Foreclosure.

Thinking now may be a good time to start shopping for foreclosures? You may be right – but you also may want to be careful. While there are houses going for pennies on the dollar in some towns and cities (like the sub-$1,000 houses in Detroit seen on the news recently), you really need to know what you are doing to get into the foreclosure market safely. With over 1.5 million homes facing foreclosure, your time for picking one up might be now. Luckily, CNN/Money has an article up with some tips for buying foreclosed homes that I figured I would share with those of you looking to do so, along with my thoughts on each:

Don’t get caught up in a feeding frenzy – Kind of a no-brainer, but I suppose people get pretty excited about getting homes for so cheap. If something gets out of control, walk away and look for another home.

Contact lenders directly – This may help keep other bidders away from your home, by getting to it before it hits the market.

Get pre-approved from the lender you want to buy from – Not sure how this would work, unless you really are only looking at the listings from a single bank. Seems kinda…limiting.

Consider fix-ups – I would imagine if you are looking at foreclosures, you are going to have to do some work on the house. Be sure you can afford whatever needs to be done.

Hire a real estate attorney – Another no-brainer, unless you are practiced in the fine art of reading legalese.

Wait to make an offer – Although this goes against the “get it before it hits the market” concept, I suppose letting others make offers before you will let you see just where a home price is headed – and you can then walk to the next one if it gets too heated before you invest too much time.

Tour properties with contractors – Kind of like having your own home inspector with you, I would most definitely find SOMEONE who knew more than me about building to go with me.

So there’s their advice – what’s yours? Have you bought or looked at any foreclosed homes? If you have anything to add, would love to hear it and pass it along to other readers!

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  2. Edwin says:

    Solid information but I do have an issue with one point. While waiting to make an offer can be a legitimate strategy, getting that information from an agent seems iffy to me.

    Agents are here to make money, which is best done buy turning around properties as fast as possible. Depending on the home they could either try to inflate their recommended bid because they thing their salesmanship can sell the house or they think the bank would accept more quickly.

    The article just seems to imply some kind of trust with the agent which I think people should be wary of.

  3. nan says:

    I have looked at a lot of foreclosures and started the process of purchasing them with a client. She lost most of those homes to investors with cash, even though she was qualified for a mortgage and money for repairs. She did not act quickly enough on a couple of them. She looked at them, then thought about it, but had already lost them to savvy, fast, cash buyers. On one, she did not offer enough of a downpayment. She lost that house to someone with just a little bit more down than she had. (This is my client I am now involved in a short sale with – ready to close!)

    I do know one buyer who went right to the lender and called about it on a regular basis. As soon as the home was ready for market, he bought it. It never made it to the MLS.

    The way a foreclosure transaction usually goes is that several buyers will put in offers to the listing agent. S/he submits all the offers at once to the bank that owns the property. The bank looks them all over and may come back with an identical counteroffer to all the buyers. This gives the buyers a chance to improve their offers – they can increase their downpayment, they can offer to pay all the seller’s closing costs and take care of any business on the seller’s side – anything to take a load off the bank. At some point, one buyer will stand out from the others, and the bank will make a contract with that person.

    A buyer should hire a Realtor®, who will hold a buyer’s hand throughout the entire process and put the buyer in contact with attorneys and contractors. I don’t recommend going through a foreclosure sale without one of us. It’s not usually a clear-cut transaction, and it involves many more agencies than a regular sale.

  4. I would say that if you’re a do-it-yourselfer, these things could be real moneymakers. Or, if you’re not going to re-sell, a good opportuity to get a good deal.

    If you’re not a DIY-er, then I think you’ve got a tough road to hoe, either way.

    But great info!!

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