Buying a Foreclosed Home? Tips to Consider

Take the necessary precautions when buying foreclosed homes.

With the sheer number of foreclosures that hit the real estate market in the last few years, a lot of investors and potential home buyers feel that they have hit the jackpot. While the recent scenario may prove to be ideal for some people, especially to those who are on the lookout for cheap houses, buying a foreclosed property can be extremely risky. So, if you are not careful enough, you may find yourself in the midst of a financial disaster. Beware ? buying foreclosed properties is usually a complex process and is definitely not for the faint at heart.

Tips in Buying Foreclosed Houses

Get pre-qualified. Before you go around looking for a foreclosed property, you need to secure a letter of pre-qualification from a lender. Keep in mind that sellers prefer buyers who have already secured financing.

Consider your budget. Foreclosed properties usually come with a small price tag but are usually in pretty poor condition. They are sold on an “as is” basis so you need to factor in the cost of repair in your budget. In most cases, you need to set aside an additional 10% of the property’s price for repairs alone.

Work with an agent. Unless you are a real estate expert, consider working with an agent who has sufficient experience in buying and selling foreclosed properties.

Set your requirements. The number of foreclosures can be overwhelming so you need to make sure your agent knows exactly what you are looking for. To get the best possible results, you should target a specific neighborhood and specify the type of property you want.

Get qualified legal advice. Keep in mind that foreclosure laws differ from state to state so you really need to brush up on the foreclosure laws in your state. Don’t rely on your real estate agent. Consider getting qualified legal advice from a local attorney instead.

Think long-term. Don’t buy a foreclosed property if you just want to make some cash on a quick flip. This would not happen. Buying foreclosed properties work best for those who are willing to make it a long-term investment and for homeowners who can afford a fully amortized fixed rate mortgage.

Don’t buy from an auction. If you don’t have enough experience in the foreclosure market, do not even think about buying from an auction. In a foreclosure auction, you are not allowed to inspect the house to see if there are any damages. In addition, you would not be given the chance to find out if the property has any senior liens. Needless to say, it may be a disaster waiting to happen.

Buying a foreclosed property has its own advantages but you need to take the necessary precautions to avoid getting yourself in serious financial trouble.??