How to Buy a Foreclosed Home
Last year houses that had been through foreclosure sold for an average of 28 percent less than other houses. Of course there are downsides to buying homes that have been through the foreclosure process, but the significant savings can be worth the extra work and time required for some buyers. There are a few different ways to buy a foreclosed home. Contact us to help you better understand the process of each.
How to Buy a Foreclosed Home at Auction
Auctions are generally conducted by third parties such as a trustee or sheriff. Buying a property at an auction can offer some high profits, but it also has several drawbacks.
- You can’t go inside and see the house
- You have to bring a 5-10% downpayment with you
- It is difficult to get a mortgage for a property that is sight unseen
- If you make the winning bid you could potentially have to evict the current residents
- Auctions are frequently canceled or postponed last minute
How to Buy an REO Foreclosed Home
An REO, or real estate owned (by the lender), is the most popular method of buying a foreclosure, because it is generally the safest and easiest way to purchase a foreclosed home. Because this is the easiest way to purchase a foreclosure, however, it can offer the most competition and the least value. In this process the home can even be sold for a profit. This offers several advantages, the bank may actual take the time and make the investment to make improvements on the house (hoping to increase the sale price), plus you can actually take a tour of the REO properties. This process is substantially less risky than buying a home at auction but can still be a lengthy process as the bank can take a long time to accept your offer, then require you to meet rapid and stringent deadlines.
How to Buy a Government Owned Foreclosed Home
Buying a foreclosure that is owned, maintained, and/or sold by the government can be a painstakingly long process with more paperwork than an REO sale.
Tips For Buying a Foreclosed Property
- It is vital to purchase a quality owner’s title insurance policy in case the previous owner comes along to make a claim that the home is still theirs.
- Never skip the home inspection, unoccupied homes can develop unusual (and costly ) problems
- And most importantly work with a real estate team that has experience in purchasing foreclosed homes. We have been working with clients to assist them in their distressed property purchases for years and look forward to helping you secure the home of your dreams – at a discount!