The Five Laws for Buying Homes in Foreclosure
Real Estate1. Above all else, do your research. Shopping foreclosure can bring you great deals, but not all foreclosure properties guarantee savings. You must be willing to look for the properties with the best opportunity for potential savings by thoroughly examining them. Be sure to call the auction or sales trustees and get as much information about the house as you can before making any decisions. Many times there may be certain things wrong with the house that will not be listed.
2. Before you decide on a foreclosure you see listed, make sure it is sold through a method that suits your needs and abilities. There are many different types of foreclosures, from bank-owned homes to pre-foreclosure properties, and choosing the right method of purchase is often just as important as choosing the right property. Some methods offer advantages that others do not, and depending on your personal situation, others may have disadvantages. For example, pre-foreclosure homes, while offering great deals, typically require more work. There is often a lot of cat-and-mouse phone calls involved, a lot of negotiation, and also a lot of face-to-face meeting time to work and close deals. If this type of commitment is impossible for you, it would probably be wise to consider a different type of foreclosure. You want to make sure you maximize your chances of getting the best deal possible, and putting in just half the effort required, even if you’re buying government homes before foreclosure, won’t give you the kind of savings you want.
3. Do a title search. Often neither the listings nor the trustees can tell you the whole story. Sometimes foreclosed homes come with additional liens against them from tax collectors or utility companies. A full title search will reveal if such links exist. Check with a local titling agency or find one online. It only takes a simple phone call, but the results could save you thousands of dollars.
4. Get an independent appraisal. Most listings come with appraised values, or else they’re usually provided by the listing trustee or local sheriff’s office, but get your own just to be sure. Hire an unaffiliated independent appraiser to inspect the home and give you an idea of its true market value, just to be sure.
5. If in doubt, inspect the home yourself. There really is no better way to understand what you’re buying than to see it. This may seem like a no-brainer, but you’d be surprised at the number of people trying to buy foreclosed homes based solely on listings. Inspecting a home foreclosure can give you an idea of its true condition, as well as allow you to estimate any repairs that will need to be done or any maintenance that will need to be done before it is habitable. All of these costs take into account your overhead when you buy a home, so make sure you calculate them exactly. If you feel the need, arrange for a contractor to come with you and provide an estimate for any repairs.
The more you know about a foreclosure, the better you will be able to estimate how much it is actually worth after taking into account costs and approximate market values. Remember, there’s a lot out there these days, so don’t be afraid to shop around for the best potential values. Follow these steps to ensure you’re making a purchase decision based on the best information available, and you’ll greatly increase your chances of making a wise investment.