Tips to Buying a Foreclosed House

The market is flooded with foreclosed unit opening up opportunities to many but one should test the waters before entering. Here is where tips to buying a foreclosed house come of invaluable use.

The foreclosure process comprises of many stages and the first thing is to decide to from which stage the picking will be made. The options are three – pre-foreclosure, auction at the court house and bank repossessed units known as REOs or real estate owned. The advice from Rick Sharga of RealtyTrac is, “The safest and best way to buy is when it’s a bank-owned property.”

The pre-foreclosure units are undergoing the process but have not yet gone up for auction. Most of these are underwater with the loan amount being more than the current worth of the house. At this stage the owners are keen to sell them off before they go up for sheriff’s auction. Consequently the buyers can make deals after talking with both the parties but this makes the finalization of the purchase lengthy and complicated. But the plus point is that the buyer gets the opportunity to inspect the house before buying. But prices are relatively high in the pre-foreclosure stage.

The lowest prices can be availed of at the Sheriff’s auction. But there are problems about inspecting the inside of the house and this means the purchaser could face massive unexpected repair expenses. It is best for the professionals to take their pickings from auction sales. They are the contractors as well as the investors who are regular bidders at such auctions and know the ins and outs.

The REOs are those units that have gone through the auction process but failed to be sold. Subsequently it reverts back to the lenders. At this stage the price may be higher than the auctioned ones but the house is free from all liens and one gets a chance to inspect the unit thoroughly. Moreover banks weighed down by too many repossessed houses are eager to offer heavy discounts. The houses are sold on a “as is” basis but even then there are problems. Adam Wiener of Redfin said, “That means the bank won’t pay for cosmetic issues, although they will often pay for some or all of the repairs that are health and safety issue. That makes the home inspection even more critical.” Another advantage of buying in this stage is that since the deal is with a corporation and not any individual the process is swifter. Often a house that is listed on Friday is sold by the end of the week.

Source: Tips to Buying a Foreclosed House