How to Buy Foreclosed Homes A Guide for Beginning Investors
Many people see the current economic crisis and housing troubles as an opportunity in disguise. This is how you can make the most of it and how to buy foreclosed homes.
The first step in how to buy foreclosed homes is to understand what these homes are. These are properties that lenders have taken back because the homeowner
has not been able to repay the mortgage. The home was used as collateral and the home was repossessed.
The next step in how to buy foreclosed homes is finding a list of these distressed properties. You can scour the internet and look for individual lists or pay a small fee for a subscription fee that gives you access to a large database of homes.
You can also work directly with one of the increasing number of real estate agents who are dealing primarily in foreclosed properties.
Next up in how to buy foreclosed homes is understanding the financial realities of such properties. For instance, distressed homes sell for as much as 30 percent off the appraised value.
However, often they have significant property damage that must be considered. Recent reports have shown that property owners who are getting evicted from their homes are ripping
out the copper pipes and selling them for scrap. While this will be considered in the appraisal price, the reality of largely rebuilding what is essentially a shell must be taken into consideration.
Another factor is whether there are a lot of empty homes in the neighborhood. People don’t want to move into these so called “ghost towns,” so in many cases, the property values continue to decline.
If you find a property that makes sense from a financial perspective, the next thing in how to buy foreclosed homes is to check the tax lien status.
Many of these abandoned properties have unpaid property taxes on them. Find out who will pay them.
If you will be responsible for thousands of dollars in tax liens, make sure you figure that into your financial assessment of the home.
Once you have determined that the property makes sense from a financial point of view, the next step in how to buy foreclosed homes is to secure financing.
Unless you have hundreds of thousands of dollars in capital sitting around, buying distressed homes requires that you be able to access financing for the properties.
Having a good credit record helps, but in these troubled economic times, banks are being difficult about lending to everyone.
The final thing you need to know about how to buy foreclosed homes is that the paperwork will be more complicated than it is when purchasing a home in the traditional manner.
This is especially true when a government agency is involved. But even if you are dealing with a lender only, the paperwork is enormous.
You may need to consider having an experienced foreclosure real estate agent or even a real estate attorney involved in the transaction.
Becoming educated in all the steps of foreclosure buying is important before you invest the time in pursuing a deal. That’s how to buy foreclosed homes.