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If you're like many prospective homeowners who've been looking at listings lately in preparation for moving forward with purchasing property, you've noticed listings for foreclosures. Some people in your position are attracted by the idea of saving money on foreclosures, while others may simply have fallen in love with a home that just happens to have been repossessed by the lending institution. Foreclosures are sold primarily in two ways — through public auctions and by private sales by the banks that own the property. Here's what you need to know about buying a foreclosed property.
Homeowners typically at least apply a fresh coat of paint and perform basic repairs before putting their properties on the market, but foreclosed properties are sold as-is. Because most of them have been sitting empty for quite some time, they may require serious repairs. You may think you're getting quite a bargain and wind up having to pay so much for repairs that you actually haven't saved any money.
You won't be allowed to see the home prior to the foreclosure auction, so you'll be basically flying blind when you make your bid — and this means that you have no way of knowing what repairs the inside of the home may need to make it livable and how much they will cost. Although you certainly can drive by the property and see what kind of condition the exterior and the yard are in, you legally can't enter it. Another issue with foreclosure auctions is that most of those who attend are professional real estate investors who are very familiar with the auction process who can easily outbid the average inexperienced bidder provided the property is worth what they want to pay. Furthermore, auction sales of foreclosures need to be paid for in cash, and most buyers simply don't have as much free liquid capital as investors do.
However, if you've fallen in love with a particular foreclosure and it's not yet slated to be sold at auction, a good real estate agent may be able to help you purchase it. Buying a bank-owned foreclosure comes with far fewer obstacles than purchasing their counterparts that are available via the auction process, and a skilled agent can walk you through it. You'll be able to inspect the property and get an idea of what repairs are going to run, which will provide you with protection against unforeseen financial losses. Bank-owned foreclosure sales happen just like their conventional counterparts, and it's also possible to get financing on foreclosed properties in this stage.
