Home Foreclosures & How to Buy a Home

Foreclosed homes offer some of the best deals on the market, as banks seek to liquidate properties and recoup some of their losses, but there are a number of things to consider. First, understand that foreclosures often mean extra work. The previous homeowner was likely not interested in helping the bank recoup the value. Also, understand that some issues may simply be cosmetic, such as a hole in the wall or dirty counters. Others may be structural, which could make the building dangerous to occupy.

Common Pitfalls

One of the most common mistakes people make when buying foreclosures is not seeing the house. Do not settle for simply a drive-by. If you personally cannot get inside the home to see what it is like, then you are better off moving on, especially if you are not looking at the property as simply an investment property. You may be able to buy a foreclosure with an inspection contingency, which could help you void a contract or force the seller to make the home safe. Also, don't forget to consider taxes and insurance in the final payment terms. Though foreclosures may be cheaper than other real estate properties on the market, they will have the same requirements, if not more, especially when using bank financing.

Where To Buy

There are a number of areas to look for when considering buying a foreclosure. Check with a local real estate agent, who should have an existing listing, searchable by whether the property is a private sale, short sale or foreclosure. Also, check local newspapers for sheriff's auctions and look at sheriff's websites as well. Some jurisdictions may sell at private auctions; others may use a silent auction system, where all potential buyers submit their bids and the property is awarded to the highest bidder, provided all other qualifications are met.

Cost

Cost is the reason many people wish to consider a foreclosure. Foreclosures are often the chance to get a great house at a bargain price. Still, especially in the case of a silent bid process, remember that the selling price may actually be higher than the asking price. Many foreclosed properties sell for 110 percent of the asking price or more, especially if they are in good shape and in desirable locations. Keep this in mind when bidding.

Comparison Shopping

As with any other type of real estate transaction, foreclosure properties should be compared against others in the area to make sure you are getting the best deal. For example, if one foreclosure costs $150,000 but a traditional home of comparable size and quality is selling for $175,000, the traditional home may be the best deal. This is a result of the work that may be required on the foreclosure, along with the fact that it may sell for more than the listed price.