1. Above all else, do your research. Buying from a 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 opportunity for potential savings by thoroughly examining them. Be sure to call the auction or sales trustees and get all the information you can about the house before making any decisions. Many times there can be certain things wrong with the house that will not show up on a listing.
2. Before you decide on a foreclosure you see listed, make sure it’s 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 just 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, usually require more work. There is often a lot of cat-and-mouse phone calls involved, a lot of negotiation, and also a lot of face-to-face meeting time to work and close deals. If this type of commitment is impossible for you, it would probably be wise to consider a different type of foreclosure. You want to make sure you maximize your chances of getting the best deal possible, and putting in just half the effort required, whether you’re buying pre-foreclosure government homes, isn’t going to give you the kind of savings you want.
3. Do a title search. Often neither the listings nor the trustees can tell you the whole story. Sometimes foreclosed homes come with additional liens placed against them by tax collectors or utility companies. A full title search will reveal if any such links exist. Check with a local titling agency or find one online. It only takes 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 if not, they are usually provided by the sale’s trustee or local sheriff’s office, but get your own just to make sure. Hire an independent, unaffiliated appraiser to inspect the home and give you an idea of its true market value, just to be sure.
5. If in doubt, inspect the home yourself. There really is no better way to understand what you are buying than to see it. This may seem obvious, but you’d be surprised how many people try to buy foreclosed homes based solely on listings. Inspecting a foreclosed home can give you an idea of its true condition, as well as allow you to make estimates about any repairs that will need to be done or any maintenance that will need to be done before it is habitable. All of these costs factor in your overhead when you buy a home, so be sure to calculate them exactly. If you feel the need, arrange for a contractor to come along and provide an estimate for any repairs.
The more you know about a foreclosure, the better you’ll be able to estimate its true value after accounting for costs and approximate market values. Remember, there’s a lot out there these days, so don’t be afraid to look around for the best potential values. Follow these steps to ensure you’re making a purchasing decision based on the best information available, and you’ll greatly increase your chances of making a wise investment.