5 Tips for Buying a Foreclosure

5 Tips for Buying a Foreclosure
  • Opening Intro -

    The foreclosure market has eased considerably in recent years, with the number of foreclosed homes now well below the peak reached during the Great Depression.

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Yet, there are hundreds of thousands of homes that are currently in foreclosure with many more expected this year. And if you’re in Florida, Maryland, Illinois, Nevada or Utah, then you have access to the states with the highest foreclosure rates according to MarketWatch. Here’s what you need to know about buying a foreclosure:

1. Know your limit. Quite easily you can find yourself getting sucked into the foreclosure market, bidding on a home that isn’t within your price range. Know how much you want to spend on a foreclosure, including repairs, and stick with that figure. If a bidding war breaks out, avoid getting caught up in the emotion.

2. Inspect with care. Are you in a position to buy a home sight unseen? Some people are, most are not. Insist on seeing the home before placing a bid for it. And bring an inspector with you to provide a second set of skilled eyes to evaluate the home.

3. The home’s history. The home is vacant. Why? What is the story behind its foreclosure? How long has it been vacant? You want some background information to give you a clue why the home was foreclosed and for how long. Perhaps another problem was present, leading to the homeowner abandoning the house. Is the neighborhood safe? Are there other distressed homes nearby? Ask the right questions to get solid answers to help you make an informed decision.

4. Check out the outside. As much as the inside of the home is important, there are outside or exterior factors that matter too. Are the gutters functional? What is the condition of the roof? The landscaping can present a problem too. A tree with branches that hang too close to the home can provide easy access for rodents. Vines may be entangled with the chimney. Soil problems can range from diseased grass to rodent infestation.

5. Patience is a virtue. Not all foreclosed homes sell quickly. In fact, it can take months for a bank to decide whether to accept your price or not. In an improving market, you will find it more difficult to get a foreclosed home at the price you want unless you’re willing to pay above the asking price. And cash talks too — if you have enough money to buy a home without a mortgage, your banker may be more receptive to your bid.

Foreclosure Considerations

If you’re buying a foreclosure intent on fixing it up and selling it, you may need to rethink your expectations. Some homes can languish on the market for months, costing owners thousands of dollars per month in maintenance, property taxes, and other expenses. Buying foreclosures isn’t for the faint of heart nor is it for people worried that they’ll take a financial hit.

See AlsoOn the Mend: Foreclosures Reach 8-Year Low

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About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".