How to Buy Mortgage Foreclosure Property
Whether the economy is struggling or going strong, real estate can be a worthwhile investment. Many first-time home buyers hoping to save thousands on their first house are looking into foreclosed homes. Mortgage foreclosures happen because the owner stops making his house payments; typically, after three or four months, the lender is forced to begin the foreclosure process to take back the home. It is then sold at auction or through a Realtor, potentially giving a buyer an opportunity at a good deal on a home.
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Instructions
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Contact several Realtors until you find one who specializes in foreclosed homes. He or she may work closely with several banks to sell their foreclosed homes. Several websites also offer listings of foreclosed homes: Foreclosure.com, Realtytrac.com, and Foreclosures.com, to name a few. These provide listings for home buyers who wish to look for a home without a Realtor or want a list of homes to discuss with the selling Realtors.
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Request financing from a lender. Being preapproved allows you to make an offer on a foreclosed home without risking losing it to another bidder who has the go-ahead from a lender. Financial paperwork needed by the lender is typically two to three years of tax returns, W2s or most recent pay stubs, and a listing of all debt and assets, including cash on hand.
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Inspect various foreclosed homes before choosing. If the house is being sold by the bank, through a Realtor, present a written offer to the Realtor, and wait for a possible counteroffer from the bank. You can accept the bank's counter or counter yourself, or you can move on to a different house. If the foreclosed home is up for auction, you may attend the auction in person and bid on it there.
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Hire a home inspector. An inspector will look for any current problems, past problems (such as water damage from flooding or plumbing issues), and any potential future problems--such as the need for a new roof in five years.
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Finalize the purchase of the foreclosed property. A "closing" will be scheduled, at which time your lender will provide funds for the purchase, less your down payment. If the home is being purchased at an auction, a cashier's check for the full purchase price is usually required on the day of the auction.
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Tips & Warnings
Shop around to various lenders to compare interest rates, closings costs and other costs. Rates and fees can vary greatly from lender to lender.
It can be beneficial to have an attorney familiar with real estate transactions look over all contracts and purchase agreements before finalizing a sale.
One disadvantage to purchasing a foreclosed home at auction is that you often can't get inside the house prior to the auction to inspect it yourself. And no disclosure is made about the condition of the house, although this is true for bank-owned properties, too.
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- Photo Credit House for sale image by Heng kong Chen from Fotolia.com
