Advice When Buying Foreclosure Properties

Considering Buying a Bank Foreclosure Property?

Jul 27, 2009

Buying foreclosure properties is a great way to reduce the cost of home ownership. Discover the pitfalls of buying a bank foreclosure property and save time and money.

Buying foreclosure properties can potentially provide an excellent investment opportunity or way for a first-time buyer to affordably get on the property ladder. Any home listed as Real Estate Owned (REO) means that it is a bank-owned property. This means that it is a distressed property that is being sold by the lender. Whilst picking up a foreclosed home or short sale can save money, the activity is fraught with perils so research needs to be performed and precautions taken before proceeding.

Compare Local Prices Before Buying a Bank-Owned Property

Before buying foreclosure properties, it is essential that local house prices are checked to get a fair reflection of the current going rate. Many bank-owned properties are priced low to attract offers. However, it is common for offers to be placed that are above bid price within hours. Understanding the local property market will help prevent a first-time buyer or investor over-bidding. Buying a bank foreclosure property is means to save money so don't get caught-up with bidding for one over-priced property.

Find a Real Estate Broker Before Buying a Bank Foreclosure

First-time buyers and investors should scrutinise a local real estate web site to identify distressed properties before proceeding. As alluded to above, these will be denoted by the acronym REO. The objective isn't to find a house, it is to identify a suitable agent. The majority of financial institutions will use the services of just one or two real estate brokers to handle bank-owned property sales. Making the right contacts will mean that a buyer can potentially get access to the best deals before the rest of the market.

Elaine Zimmerman, a Memphis real estate investor and author said that: "A lot of these Realtors have a long-term relationship with these banks, and they know of listings that haven't even come on the list yet. Call them about the listings that you're interested in, but also ask them about listings that may be coming up because sometimes it may take a day or two or even a week before a listing actually comes onto the database."

Get Mortgage Approval Before Buying Foreclosure Properties

Distressed properties (foreclosures and short sales) often appear on the market very quickly. First-time buyers need to ensure that they are able to get a mortgage before buying a bank foreclosure at an auction. They also need to act quickly before the best deals are snapped-up.

Robert Jenson, owner of Jenson Group at RE/MAX Central in Las Vegas said that: "The problem is buyers want to find the house first, and then they think they'll work out the financing. The problem is that the really good deals on bank-owned property go quick - and the buyer doesn't necessarily have time to try to work out the financing afterward. They need to work that out first."

Whilst buying foreclosure properties is potentially a great way to save money, it can be a costly exercise for those who fail to do their homework. Find out how much comparable properties sell for in the vicinity. Also, try to identify a real estate broker that deals with distressed properties in order to get a head-start on other bidders.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.

The copyright of the article Advice When Buying Foreclosure Properties in Buying/Selling a Home is owned by Asa Ghaffar. Permission to republish Advice When Buying Foreclosure Properties in print or online must be granted by the author in writing.