1Buying a Pre-Foreclosed Home

Pre-foreclosed homes are already in the foreclosure pipeline although they are yet to be dispatched for auction. Such a property is also described as being ‘underwater’, i.e., the owner owes more on it than what he/she is worth. This is indeed the reason why the property is being offloaded by the owner. As a potential buyer of a pre-foreclosed home, you are meant to make sale negotiations with both the lender and the property owner – a situation which makes this process characteristically slow and protracted. Unlike in other foreclosure property sales, you have the advantage of being able to view the property. However, the prices for such properties tend to be the highest compared to the other foreclosure stages.

2Buying a Sheriff's Auction Foreclosed Home

At this stage of foreclosure the property is put up for a public auction, i.e., the sheriff’s sale, a process that is overseen by the local county court. The house ownership is passed to the person who makes the highest bid for the same. Buying a sheriff’s auction foreclosed home comes with pros and cons.

For the pros, the first one has to be the fact that the price offered will be very ideal in that it will most likely be far below what the current market rates are. This means that the new owner stands to make a good return on investment whether he/she decides to sell or live in the property. These properties are also advertised well in advance, typically one to eight months prior, and this gives prospective buyers ample time to consider whether or not making a bid is a good decision. Also, buying a sheriff’s auction foreclosed home can be quite advantageous in that several of these may be ongoing in a particular area and this spread of potential buyers may actually serve to slim the competing field.

The cons begin with the fact that bidding for such a property requires a cashier’s check or ready cash to complete the transaction. Many people are ruled out of the process just because they cannot meet this stipulation, especially considering the fact that one has to settle the entire amount within 30-90 days or risk losing the property. Buyers who are new to the sheriff’s auction process are prone to making rookie mistakes in the bidding process and thus end up acquiring properties that they didn’t actually wish for. Lastly, an unfortunate buyer may acquire property that lies on land which has disputable issues like zoning or pollution/contamination and therefore be forced to contend with these unplanned-for issues.

3Buying a Foreclosed Home in Repossession (REO)

This applies to properties that have been through the sheriff’s auction but have not been sold. The possession of these properties is then passed on to the bank. At this stage of foreclosure home buyers are unlikely to get the bargains they would have desired. It is however possible for them to conduct a thorough inspection of the property before closing and in the process, spare themselves from probable surprising costs. For such properties buyers get the convenience of acquiring a clear title.

Buying such a foreclosed home also comes with the possibility of getting financing help from the respective bank involved. The same bank may also have taken the initiative to undertake some repair work on the property before presenting it for sale. These repairs are often confined to satisfying health and safety standards and not the more cosmetic aspects, making prior inspection all the more critical on the buyer's part.

4How to Buy Foreclosed Homes: Factors to Consider

• Be mindful of the actual repair costs.

   

  It is prudent to never underestimate what the repair costs might amount to. This means that before buying a foreclosed home you should take full advantage of the inspection opportunity to assess these costs, preferably with the assistance of a home inspection expert. Alongside this, you should ideally include an extra amount in your purchase price for these expenses – an extra 10-20% is quite in order.

 

• Establish what comparable properties cost.

   

  You cannot afford to be ignorant of what neighboring properties cost especially in areas experiencing high foreclosure rates. It is always prudent to know what the latest prices on similar properties are which will then enable you to make a sensible, lower bid.

   

  The same applies to the choice of buying location. Choosing to buy a foreclosed home in an area where these cases are frequent portends the probability that property prices will continue falling with time. It is advisable to opt for a foreclosed property that is located amongst a stable environment; such a property’s value is more likely to remain stable with time.

 

• Ensure that you have financing means at the ready.

   

  Dealing with banks is quite a straightforward affair – they always want to work with buyers who have the highest bids and financing at the ready. You should therefore make prior plans to secure the required finances/funds even if it means taking out a loan for this purpose. This is indeed a prudent technique to buy a foreclosed home because you will scarcely spend time scouting for properties that are beyond your scope.