Are you considering buying a home after foreclosure? With the market being what it is today, if you have the time and the money to invest, it could end up being a wise decision to pursue this route. Make sure you learn about how to research the best properties and get help when necessary so you end up buying a bargain, and not a lemon.
Your first step is to decide in what stage of the foreclosure process you want to buy. The general options include pre-foreclosure, sheriff’s auction, and the repossession stage (referred to as REO which stands for Real Estate Owned by the bank). Buying a home after foreclosure would, of course, exclude the pre-foreclosure option.
Bank-owned properties are generally considered the safest ways to go, so they are ideal if you are new to the foreclosure buying. Sheriff’s auctions usually sell the lowest priced houses, but you need to have some experience or expertise in order to get the good end of the stick on these. In these cases, the houses are usually not available for inspection, so it’s easy to pay a lot more in the end than what you thought you would have to pay for repairs.
A repossession takes place when the house was not sold at the auction, so the bank gets it back. You will most likely not get the best deals at this stage, but at least you will get a clear title and an inspection so you won’t be surprised by any unexpected expenses, minimizing costly surprises. The other benefit is that the lenders who sell these homes may have already made some repairs and can also offer good financing terms. While these are safer bets, the houses are still often sold in “as-is” condition. But they may be willing to pay for some of the repairs that are deemed necessary after the inspection is performed. Another advantage is that these types of deals can go through much faster.
The importance of the home inspection cannot be over-emphasized. Make sure that you take someone with you that you can trust to give you the full picture. Never underestimate the costs involved in repairing a house. In fact, you should add in at least 10 percent of a cushion for extra repairs over what is estimated.
A good tips is also to buy foreclosures in areas that do not have many other foreclosures. These types of areas will only lead to a decrease in the market value of the home that you buy. Another tip is to make sure you are sure to get financing. You need to be pre-approved in order to move quickly. Also, keep in mind that being pre-qualified is not the same as being pre-approved. Pre-qualified is a step in the right direction but more work needs to be done in order to get you pre-approved for buying a home after foreclosure.