How to Purchase Foreclosed Property

Banks (or other mortgage lenders) sometimes have to take back a property when the buyer proves unable to pay the mortgage. The legal process for doing this is what we call foreclosure. When this happens, the bank must then sell the property to recover the money they lent. This creates an opportunity for individuals to purchase foreclosed property at bargain prices and make a profit. If you are interested in buying foreclosed houses or othr property, the steps below outline the process. Be aware before you start that the procedures are complex and require a lot of work. But with patience and caution you can make money when you purchase foreclosed property.

Difficulty: Challenging

Instructions

1. Learn what the regulations and procedures for buying foreclosed property are in your state. In most states agencies that regulate financial and lending institutions can provide you with basic information. If you want to consider foreclosures by the federal agencies (like HUD) you will need to learn about their procedures as well.

2. Find an experienced real estate agent who understands the foreclosed property market. He or she can help you find listings, negotiate, and take care of the paperwork (which is considerable) to purchase foreclosed property. In many situations you will find that the seller won’t accept offers unless they are made through an agent.

3. Pre-qualify for a mortgage. A bank will do this before you have a specific property in mind. By pre-qualifying you can start your search for foreclosed property with the assurance that the bank has approved lending you a given sum. This also lets your agent and potential sellers know you have the resources to purchase foreclosed property.

4. Search for foreclosed properties to consider. You will need to start checking out a variety of sources. You can find listings of foreclosed properties in auction notices, newspapers, and local real estate publications (especially newsletters). It’s helpful to find properties are going into foreclosure quickly. One way to do this is to monitor public notices of default (such notices are required by law prior to a foreclosure). These are normally posted by the local county clerk’s office.

5. Determine the ownership of any property you find that looks interesting. Equally important, find out if there are any liens on the property that you might be liable for if you purchase the property.

6. Inspect the property before you make any offers. Foreclosed properties are normally sold “as is” so if there are any repairs needed you will have to make them. This may not always be possible, especially with HUD foreclosures. If you do find an attractive property that you cannot inspect, exercise caution. You will have to gather as much information on the property as you can and then make a judgment as to whether it is likely to have major problems.

7. Negotiate hard with the seller. Usually this is a bank, and their goal is just to unload the property for enough to recover their money as quickly as possible. So be aggressive. They are going to be willing to discount the price a lot simply to get the property off their hands.

8. Make your offer, whether in the form of n bid at auction, a sealed bid, or a direct offer to the seller. Be prepared to be turned down, though. Foreclosed properties that are good buys attract lots of investors and competition can be intense. Sometimes your offer will be picked, and sometimes somebody else will edge you out. That goes with the territory, so be ready to be disappointed occasionally.