What You Need to Know About Buying Foreclosures

Any real estate agent will tell you to stay away from foreclosures because, for the most part, they cause more trouble that they are worth. Also, it’s not for the faint-hearted because you are essentially moving into the house of a family evicted by the bank. However, if the conditions are right, like if you closed on it for a very small price, the property is uninhabited, the house is structurally sound, and ready to move in to, then purchasing a foreclosed property from the bank is a good deal. 

How Much Can You Save on Buying a Foreclosed House?

Auctioned properties cost about 30% less than normal. The discount could be more, though, considering that this is just an average. However, nothing comes for free. You really have to do your due diligence because some properties still have mortgages and liens against them and you buy those liabilities along with the house.

Also, the policy of the auction is “as is where is,” which means you buy the property warts and all. You may find later on that the basement is flooded, the foundation is rotten, or that the roof has problems which will be expensive to fix. Whatever savings you may have made in the foreclosure sale could all go into repairs.

First-time buyers are not advised to buy foreclosed properties because of the many pitfalls. A first-time buyer’s lack of experience could result in them purchasing a money pit.

Value of Hiring an Agent When Buying a Foreclosed Home

The government and private banking institutions list houses to be auctioned on their own websites, usually viewable via a drop-down menu or in a downloadable form. The Department of Housing and Urban Development also has its own list of foreclosed properties. Fannie Mae and Freddie Mac are other options.

The purpose of going through these websites is not to scour through the list of foreclosed properties, but rather to find a reputable agent. Real estate agents have a wide network of realtors who may have inside information on where to find houses that are about to be foreclosed on.

The realtor will also help come up with a comprehensive comps that will determine the right bidding price. You have a better chance of getting good discounts on properties that have sat on the market for a long time.  If things get tricky during the home buying process, a good realtor can be the difference between getting the house or losing the deal.

As you can see, you can minimize the risks by hiring a realtor who is an expert at foreclosure sales. The realtor will be able to brief you on the risks and benefits of buying an auctioned house. He or she will also help you to scour for properties that are right for you, and even help you in the bidding process. Remember, the trick is to bid the right price for you because there’s bound to be other bidders during the auction. In foreclosed properties, patience is the key. Your mind-set should always be on the long-term.