How to Buy A Foreclosed House

Depending on your current local Real Estate market, you can benefit from Foreclosed Properties!

Instructions

Difficulty: Moderate

Things You’ll Need:

• A letter of Approval from a bank or "Cash".
• A Licensed Realtor or Attorney familiar with Bank Foreclosures
• The "Guts" and "Gumption" to see a project through to completion!

1. Educate yourself!
   The first step is to learn as much as you can about Real Property and the process of owning Real Property.
   Since the process of buying a foreclosure is quite a bit different than buying from a private seller, you must do research, ask lots of questions and read articles like this one.
2. The next step, if you have decided to pursue a foreclosed property is to talk to a banker. Know your credit score!
   You must be pre- approved or have "Cash" money to make an offer on a bank owned property. Cash refers to paying in full, or partial with negotiable terms.
   Most "Banks" will require a pre approval through them regardless of your lender to ensure that you can move forward on "THEIR" property.
3. Find a licensed Realtor or Attorney that specializes or is familiar with foreclosures.
   Interview them for the job. You are hiring them for their experience and skills!
   Ask for referrals and references. You will need inspectors, contractors and possibly additional financing options. Utilize their experience and resources.
   This is also the time to open yourself up for other opportunities. Not all foreclosures are a good investment. If your local Real Estate market is depressed, private sellers may be willing to "Dump" a property in better condition for a better price than all of the repairs, money and time it will take to rehab a foreclosure that may have been vacant and in neglect for a year or more.
4. If you have a good working relationship with your Representative (agent or attorney), you should have some prospective properties to consider.
   Do a "Drive-By", take a look at the neighborhood. You may not be allowed to approach the property without the agent or a legitimate offer. Do your best to use the information you have (square footage, number of rooms and lot size), to determine if the property will meet your needs.
   Research the area. Are you planning to rehab and "Flip" (resell quickly)? Or are you planning to live on the property or rent it out?
   If you plan to resell, research the market. If nice homes are not selling, why should this one when it's finished? Remember, even in a depressed market houses DO sell. It's usually based on price and availability.
   If you plan to live in it or rent it out, what remodeling will need to be done to make it inhabitable? How much will that cost?
   Consider your personal safety and health as well. High crime areas and environmental concerns must be addressed!
   Finally, realize that some properties must be acquired very quickly if you want it and others are interested.
5. If a property passed an initial Drive-by or viewing, it's time for action!
   Get your representative involved. They work for YOU. Hire inspectors and consultants to estimate your risk.
   Also realize that many Foreclosures are sold AS IS. That means NO contingencies (inspections or loop holes allowing you to get out of the deal). Also do research, some structural repairs and environmental concerns might be negotiable or required by law!
   Inspectors could include, Home inspectors, Structural Engineers, Pest Inspectors, Mold and Environmental inspectors, etc.
   You will be required to pay these inspectors regardless of whether you actually purchase the property or not.
   Accountants and Attorneys can help you limit liabilities and financial risk. It is also highly recommended that you discuss forming a Corporation or Limited Liability configuration with your attorney. It is especially advisable if you plan to buy, rehab and sell or rent multiple properties.
   Discuss hidden costs such as liens or judgements attached to the property with your Realtor or Attorney, These may or may NOT be recorded on the title.
6. If the property has passed your financial analysis, inspections and you are ready to move forward, it's time to submit an offer.
   Your representative will walk you through the process. Make sure that you are prepared! Ask questions, take notes and ask for copies.
   You must understand what is negotiable and what is not. Your offer should benefit you while enticing the bank to WANT to accept it. In closed Bid or multiple offer situations, you must use you best judgement. Formulate the highest price you are willing to pay, add the estimates for repairs and labor, then add an additional 10% for error or unexpected developments. Decide if it makes sense to you.
   Finally, during negotiations stick to your guns! Stay focused on your goals and watch your money! Most importantly, Trust yourself and Representative. Some negotiations can take weeks, even months, especially with bank owned properties. Make sure that your financing is still good during this "Down" time.
   The Goal is to get mutual acceptance and close on the property.
   Once you have mutual acceptance, you can get ready to start your new project. But be careful, things can fall apart before the property is recorded into your name. Stay positive!
7. In conclusion,
   The difference between investors and individual buyers is the motivation.
   An investor has only themselves to blame if their investment turns out to be a HUGE liability. Do the research, educate yourself and learn by doing!
   Good Luck, and I hope this was helpful!

Tips & Warnings

• Do your research.
• Be persistant.
• Be successful.
• I hold no responsibility for content in this article. It is based on personal experience and is for your entertainment only.