The agony and the ecstasy is what CNN has called it. I call it the ultimate zero sum game. Someone wins while another, unfortunately loses. What else is it but this thing called the foreclosure market.
We’ve discussed the pain and aftermath of foreclosure here in the past. But what we hadn’t yet touched upon is the other side of this situation, the case in which families who just a few years ago thought they could never become homeowners in their lifetime, suddenly finding themselves lucking out with keys in hand and a new roof over their heads. It’s unbelievable to see how homes in some parts of the nation (e.g. California) — that were once selling for $500,000 to $600,000 a pop — have now returned to earth, finally selling for a third of their peak prices. Each foreclosed home is a dreadful loss for anyone who bought at the peak but who now has to give up their property, but each is also a heaven-sent bargain for anyone who could only fantasize at one point, of owning their own place.
For those interested in exploring the possibility of buying such homes, here are a few ideas:
How To Buy A Foreclosure: Find Foreclosed Homes Online
1. Understand the types of foreclosures that are available.
There are many kinds of foreclosed property to choose from. Before you enter the market, it’s good to have some understanding of what it is that you are looking for. According to Smart Money, there are different kinds of foreclosures to choose from:
- Preforeclosed properties: you can attempt to buy from the owners before they default to their lenders.
- Auctions: you can try the county courthouse or other auction venues.
- Bank-owned properties, aka Real Estate Owned (REO): these are available through real estate brokers and various sites.
- Government Homes: only HUD-approved brokers can bid on these.
Know what your goals for the foreclosure are: are you looking at this as a new home or as an investment (for rental or resale)?
2. Study the foreclosure market using free and familiar real estate sites.
You can check the listings by perusing the more popular sites that are familiar and free, such as Yahoo! Real Estate and AOL Real Estate. These listings can be arranged by list or photo view. From the detailed descriptions, you can find out how much the owner wants, the number of bedrooms and bathrooms, and details like the square footage of the properties. I like the map feature, which lets me see the neighborhoods.
Starting off at one of these sites will give you some idea of what’s available, along with price ranges. You should also compare the foreclosure prices to other nearby homes to see how much of a deal you might find.
Thanks to the ability to customize your searches by date listed, price range, city, and more, you can quickly figure out what appeals to you!
3. Check real estate services that offer a free trial.
If you need more than what the free sites are offering, you may want to consider looking into other foreclosure sites that offer subscriptions. These offer 7 day trial memberships, but please be aware that they could charge an ongoing subscription fee after the free period is over. Some suggestions:
RealtyTrac: This site is partnered with Yahoo! Real Estate to offer you more listings. For more details about a foreclosure on Yahoo! Real Estate, you’ll be directed to register with RealtyTrac for a free trial. Benefits of membership include tax assessment information, access to online auctions, and more.
Bargain Network: For more details about the listings on AOL Real Estate, you’ll be steered towards a 7-day trial offered at Bargain Network. They can assist you with foreclosure law, provide you information on neighborhood demographics, and assist with financing, among other things.
Foreclosure.com: With this site, you can search for listings by state or zip code, or decide to sign up for email alerts for the types of listings you want. The article center features interesting write ups on topics that steer you through the buying process. In the event you need a real estate broker, you can search for one here. Like RealtyTrac and Bargain Network, it offers a free 7-day trial.
HomeGain: This is another site offering foreclosure listings. Like with the other sites, you can find a realtor, start looking for listings, or check on home values. I noted though, that some of the listings simply led me to their partner site, RealtyTrac.
4. Check the periodicals and home magazines.
Your local papers can be a great source of foreclosure information. In my neck of the woods, we’ve got magazines and supplements on foreclosures that are available at paper stands located at local businesses. You can go online shopping on Craigslist as well: enter “foreclosure” in their search box and see what the site yields you.
5. Pay a visit to your local realtor, bank or credit union.
For local foreclosures, you can always turn to a trusted real estate agent in your neighborhood. If they can’t supply you with direct listings, they may still be able to point you in the right direction and provide you with the resources you need. The same goes for financial institutions in your area. For instance, one credit union I know of sometimes auctions off vehicles, so it might be fruitful to ask if they also handle foreclosed properties.
Along these lines, you could also try your luck with the law. For example, our local County Sheriff’s Office updates its property list on Thursdays and holds open auctions on Tuesdays. For these events, a buyer needs to bring a cashier’s check for 10% of the bid price the next day; the rest is due on completion of the sale, which takes about three weeks.
6. Know how much work you’re willing to do.
As with any property purchase, you’ll need to ask if the bargain is worth the work it might bring. It’s one thing to buy a new house for a song, but if you have to sink ten times its cost into renovations, then it might not be worth it. You’ll need to set aside some money for fees and any unexpected expenses, too.
7. Consider buying from a bank.
I’ve heard a lot about foreclosure auctions, but going this route may be risky. If you buy a foreclosure this way, before the bank has taken it over, they you’re required to buy it without the benefit of inspections. Plus, homes on auction may have liens on them. It’s preferable to buy foreclosed homes through a bank since it’s less of a risk: bank-owned properties have had their inspections plus you may be able to get financing more easily this way.
8. Have a contractor check the property.
A suggestion from the experts: always have a contractor inspect a property before you make the purchase. Let the contractor tell you how much it’ll take to restore a house and turn it into something livable.
9. Be prepared to haggle.
Sharpen your haggling skills! Many foreclosed homes are valued at market so if you’re looking for a better deal, be prepared to negotiate for a better price. Some tips? Check your bank’s foreclosure inventory — you’ll get more leverage on properties that have been sitting around for a while. Also, for areas inundated with foreclosures, start off with at least 20% below market when you make your first offer.
10. Be patient.
While shopping for foreclosures, it’s best to get your ducks in a row so that your buying experience goes smoothly. This is especially the case because despite the apparent supply of foreclosures, there will be many buyers ready and waiting to compete with you to snatch away these deals. So be prepared with your financing, get pre-approval, have your eye on multiple real estate options and be diligent about following up with your bank, agent or lender.
Finding a foreclosed home can take a bit of dogged research, but it’s worked out very well for many homeowners who have been able to find their dream homes.
Thanks to Millie Kay G. for her contributions to this piece!
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