How to Buy Foreclosure Homes

Posted in Foreclosures by Johns Wu
July 23, 2007 02:06 AM - 12 Comments

HOW TO BUY FORECLOSURE PROPERTIES Buying foreclosed properties has become so popular that there are even television shows based on buying them, fixing them up, and putting them back on the market to make a quick profit. Whether you are interested in purchasing a foreclosed home to sell or to live in, foreclosure sales are a great way to pick up a property for less than market value.

Buy Houses at a Foreclosure Auction

Although some savvy real estate investors elect to purchase homes in the pre-foreclosure stage via the short sale, most choose to avoid this lengthy process by sticking to properties upon which the lender has already completed the foreclosure process. Once a lender forecloses on a property, the maintenance of that property becomes the responsibility of the lender. As you can assume, the lender wants to make money off the property, not invest in its upkeep. Because of this, if a lender puts a home on the market via a conventional realtor, they will not want to keep it on the market for long, and will eventually opt for a foreclosure auction to unload the property to the highest bidder.

Don’t Pay for Foreclosure Listings—They’re Free!

After the mortgage lender takes possession of the property, you can purchase it from a listing agent or via auction. There is no need to spend money on foreclosure listings offered on the internet because if you are truly interested in purchasing a foreclosed home, there are many resources to be had for free. These listings are public information and can be obtained simply by contacting a real estate agent, county sheriff’s sale office, by visiting government websites, or the websites of the auctioning agents.

Foreclosure Auctions Offer Great Deals on Properties

Foreclosed homes used to be auctioned off for generally less than fifty percent of their fair market value. However, the popularity of this means of home buying has resulted in greater attendance at foreclosure auctions and, more bidders means more competition, which leads to higher sales prices. Still, foreclosures are going for easily a minimum of ten to twenty percent off the market value of similar properties making them a substantial investment.

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Amadeus said:
on July 27th at 06:40 pm

The trend over the past two decades seems to have shown higher attendance by more institutional and professional real estate investor bidders in foreclosure auctions, but the beauty of real estate is that every market is local. There are still plenty of rural and sleepy towns out there that won’t see much attention from the big players that dominate the auctions in bigger areas.

Even if your own area cannot be characterized by a “Small Town, USA” demographic, it’s almost always worth doing the research and showing up to at least a few auctions to get a feel for the amount of competition out there. You may be surprised.

Whatever you do, do not get caught up in the excitement of a bidding war under any circumstances. You should walk into the auction with firm limits that are well beyond conservative and be ready to walk away from any deal that exceeds that limit. You may walk a few dozen times before a real steal comes along, but that one deal will make all your time worth it.
James said:
on July 28th at 04:26 am

I would make one exception to the sound advice of “don’t pay for foreclosure listings” in that it may save some time and effort by paying. It really depends on how much you value your time. If you are running a small business and you take an hour in the day phoning up county sherriffs departments and going over government websites, that’s an hour you could have billed. However if this time is genuinely spare the advice is true - these resources are free. You don’t pay for the listings, you pay for the time saved.
ciscogrove said:
on August 1st at 01:59 pm

The easiest way I found to get all the foreclosure listings in my county was through a title company. Where I live they are called Escrow and Title companies because they perform both functions. They give this information to anyone who asks and they give it for FREE. Don’t pay for it unless you can’t get a date otherwise .

Having specialized in this market let me toss this piece of advice onto the table. Know the LAW in your state regarding foreclosures. You could just find yourself in a bind otherwise.

Also, if you don’t know how to investigate the property before the sale, stay out of this arena. You will get burned. Foreclosed houses don’t necessarily go for 10 to 20 percent below market value. What drives the price of the house is the number of bidders.

I’ve been at auctions where the dummies overbid the house by astronomical numbers. When asked (I always asked why someone paid what they did if it exceeded my market value calculations) most said their tenant would be paying the mortgage payment.

I bet you can tell me the rest of that story, right?

Anyway, just my 2 cents.
gkr said:
on August 5th at 03:12 pm

Buying foreclosure homes is like gambling if done without any proper home work on the part of the buyer. It is a must for the buyer to know about the home he is going to by and at what rate he can best buy it. Otherwise the buyer only ends up in distress and gets trapped in the new costs of the home.

Foreclosure homes can be cheaper if done during the process of foreclosure rather than buying at an auction by the lender. This takes considerable time but it saves money and gives quality to the house as homeowner may damage and strip it off during foreclosure.

Unpaid taxes on the property are not eliminated when buying the home at foreclosure auction.

It is better to attend foreclosure auctions to learn how they occur and who buys them at what price. You can also find out the quality of the home involved. This will help you assess the price of the home before attending the foreclosure auction and while attending it you can change the price and limit yourself to that price. As always in the auction markets, patience pays here.
sell property uk said:
on August 31st at 05:39 pm

i have bought couple of house of this kind in last year. It can be a good investment but you have to be very careful at what you buy otherwise you might end up hurting your self

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