The Five Laws of Buying a Home in Foreclosure

1. Above all else, do your research. Buying foreclosure can get you great deals, but not all foreclosed properties guarantee savings. You must be willing to search for the properties with the best potential savings possibilities by thoroughly examining them. Be sure to call the auction or sales trustees and get as much information about the home as you can before making any decisions. Often times, there may be certain things wrong with the house that will not show up on a list.

2. Before you decide to search for a foreclosure that you see listed, make sure it is sold through a method that suits your needs and abilities. There are many different types of foreclosures, from bank-owned homes to pre-foreclosure properties, and choosing the right method of purchase is often as important as choosing the right property. Some methods offer advantages that others do not, and depending on your personal situation, others may have disadvantages. For example, pre-foreclosure homes, while offering great deals, generally require more work. There are often a lot of cat and mouse phone calls involved, a lot of negotiations, and also a lot of face-to-face meeting time to work and close deals. If this type of compromise is impossible for you, it would probably be wise to consider a different type of foreclosure. You want to make sure you’re maximizing your chances of getting the best deal possible, and putting in only half the effort required – whether you’re buying pre-foreclosures for government homes, it won’t give you the kind of savings you want.

3. Perform a title search. Often times, neither the listings nor the trustees can tell you the whole story. Foreclosed homes sometimes come with additional ties that tax collectors or utility companies hold against them. A full title search will reveal if such links exist. Check with a local titling agency or find one online. It only requires a simple phone call, but the results could save you thousands of dollars.

4. Get an independent appraisal. Most listings come with appraised values ​​or are otherwise generally provided by the sale manager or local sheriff’s office, but get your own just to be sure. Hire an unaffiliated independent appraiser to inspect the home and give you an idea of ​​its true market value, just to be safe.

5. If in doubt, inspect the house yourself. Really, there is no better way to understand what you are buying than to view it. This may seem obvious, but you will be surprised how many people try to buy homes in foreclosure based solely on the listings. A home foreclosure inspection can give you an idea of ​​its true condition, as well as allow you to make estimates about the repairs that will need to be made or any maintenance that will need to be performed before it is habitable. All of these costs influence your overhead when you buy them at home, so be sure to calculate them exactly. If you feel the need, arrange for a contractor to join you and provide an estimate for the repairs.

The more you know about a foreclosure, the better you can calculate its true value after taking costs and approximate market values ​​into account. Remember, there is a lot out there these days, so don’t be afraid to search for the best potential values. Follow these steps to ensure that you are making the decision to buy based on the best information available, and it will greatly increase your chances of making a smart investment.