How to Buy a Foreclosed Home

If they know how to buy a foreclosed home, many homebuyers can get a lot of home for a relatively small amount of money. But, while they can be a real bargain, purchasing a bank-owned property has its own risks attached, and buyers need to know the rules that come into play when they try to purchase a foreclosed home.

Do The Research
Understand that a foreclosure happens when the owner can't keep up with the mortgage payments. The owner receives a notice of default, and the information enters the public record. Homebuyers can search records to locate struggling properties, research liens on the home and measure sale prices for similar homes in similar neighborhoods. State foreclosure laws differ from state to state-some states must issue a court order to sell the property, while others are able to bypass the court and get the property sold via more traditional methods. Foreclosure auctions are another place to find foreclosed homes for sale, and local and regional publications can assist interested parties in buying foreclosed homes.

Talk To The Seller
Once you've located a foreclosed property, find out who the seller is and who the sales representative is. They may not be the same person or group. The original lender is always the seller in a foreclosed property, and sometimes representatives of the bank will deal directly with interested buyers. Other times, a bank will work through a traditional real estate agent who specializes in foreclosed homes for sale. Regardless of the representative, the home will usually be offered under fairly attractive terms since the seller wants to unload the property.

Myths About Foreclosed Properties
Most people have heard stories about someone getting an incredible deal on a foreclosed house, paying anywhere from 40 to 50 percent of the home's true value. However, most foreclosed properties rarely go below more than 5 to 10 percent of a home's market value. Another myth about foreclosed properties is that they are all in bad shape, with owners neglecting repairs and upgrades. It's true that many foreclosed properties need some massive renovation help, but, with the right research and an expert opinion on the property's condition, buyers can expect exactly what they see, without any hidden surprises.